FERTILIZER prices have already eased from the peak levels recorded in 2022 but prices remain high due to disruptions and restrictions that make it more expensive, according to World Bank economists.
In a blog, World Bank Development Economics Prospects Group Senior Agriculture Economist John Baffes and Centre for Strategic and Policy Studies Brunei Darussalam Researcher Wee Chian Koh said the production crunch in Europe; trade disruptions caused by the Ukraine-Russia war; and export restrictions in China continue to affect fertilizer prices.
These developments are a cause for concern for countries like the Philippines which are heavily reliant on imported farm inputs like fertilizer.
“Fertilizer prices have eased from their early 2022 peaks but they remain at historically elevated levels. The price easing partly reflects weak demand as farmers cut back fertilizer field applications due to affordability and availability issues,” the economists said.
“The industry is also affected by supply-side issues, including a production crunch in Europe, disruptions due to sanctions on Russia and Belarus, and trade restrictions in China,” they added.
Baffes and Koh said the rise in natural gas prices in Europe has caused a 70- percent reduction in the production of ammonia, a key ingredient in the production of nitrogen fertilizers.
However, the economists believe the “milder winter” and higher imports to boost Europe’s energy reserves have already led to the easing of fertilizer prices. This, the economists said, could also allow shuttered nitrogen fertilizer production facilities to resume operations.
Meanwhile, the supply disruptions from the Ukraine-Russia war came in the form of sanctions on Russia and Belarus by the European Union and the United States.
As a result, potash exports from Belarus declined by over 50 percent while Lithuania halted the use of its railway network to transport Belarusian potash to the port of Klaipeda, which typically handles almost all of Belarus exports.
Based on the United States Geological Survey, potash is used primarily as an agricultural fertilizer.
Meanwhile, in order to ensure domestic supply, China has imposed restrictions on fertilizer exports. This has affected the supply and cost of fertilizer worldwide.
China’s export of Diammonium phosphate (DAP) fertilizer contracted by almost 50 percent in the January to October period of 2022. DAP from China accounts for 30 percent of the global trade in the commodity.
At the same time, Chinese urea exports declined by about 60 percent year on year in the January to October period last year.