As central banks around the world hike interest rates in response to inflation, one ag economist says all signs point to a global recession, and that could affect fertilizer inventory here in the U.S.
Researchers at AgriFood Economic Systems, based in Canada, say North Americans are the lucky ones when it comes to fertilizer supplies. Dr. Al Mussell is the lead researcher at AgriFood and says as Europe deals with its energy crisis, western Europe is already expecting a smaller food crop harvest next year due to severe input shortages.
“The front line on this, really, is western Europe. It’s Germany, it’s France, those western European countries. They are in a bad way, and I don’t know if, as North Americans, we sense just exactly what they are going to have to contend with. Before the Nordstream gas lines were blown, they had an energy crisis on their hands. You’re going to have short crops next year because the fertilizer just isn’t there,” said Dr. Mussell.
Prior to the Russia-Ukraine situation, the world has not been able to build a solid grain stocks inventory for five years. While inventories did show a slight increase last year, Mussell says those numbers are misleading. Along with the energy crisis, western Europe has a looming food shortage which is based on a lack of nitrogen-based fertilizers.
“There’s not enough nitrogen fertilizer to go around, there just isn’t. We haven’t been able to build stocks since 2017. Year by year, basically we’re feeding ourselves out of the previous year’s harvest. Last year, the stocks were up. Well, the reason for that is when you’ve got 21 million tons of corn and wheat stuck in Ukraine, that obviously affects that relationship. To a much greater extent over time, those stocks are being held in importing countries. If they’re sitting with an importing country, they’re not moving,” Dr. Mussell said.
In a world where demand will outpace supply and shortages are commonplace, forward planning is a necessity. Dr. Mussell says producers should have as much input inventory in place as possible, and now is the time to have a friendly banker on your side.
Last week’s fertilizer check by DTN showed five of the eight major fertilizers sitting at lower levels compared to the prior week. However, all of them were up drastically versus a year ago.
