Fertilizer market volatility leaves many to wonder how we got into this situation, and Corey Rosenbusch, president and CEO of The Fertilizer Institute (TFI), says there is not a single answer or event that triggered high prices. Rather, a series of global trade disruptions caused the situation and continue to drive the markets we face today and into the future. 

Rosenbusch shared his insight as keynote speaker on Jan. 17 at the Arkansas Crop Management Conference. He gave an overview of worldwide events which set the stage, and he encouraged attendees to think about disruptors that may challenge the future of the fertilizer industry. 

“Fertilizer is a globally traded commodity, with approximately 90% of all fertilizer consumed outside the U.S.,” he said. “So, when you think about prices, how they are set, and what drives the market, we have to think about this from a global perspective.”

Global trade disruptions

The entire world has realized fertilizer’s critical role in global food security. It is obvious, Rosenbusch said, because the fertilizer market has even made its way into the evening news. 

While we still feel the effects of supply chain disruptions and turnaround delays from the COVID pandemic, it goes beyond that. The State Department has even named fertilizer as one of its top three issue areas, hiring experts to help mitigate on the geopolitical stage. 

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On the supply side, China and Russia lead fertilizer production, and many do not realize that China blocked exports at the brink of this very sensitive situation. This completely removed one third of all ammonia and one third of all phosphates from the market. 

Rosenbusch noted that for the first time ever, China’s population is in decline and the country is clamoring for power. So, why are they blocking their exports as the largest fertilizer producer in the world? 

China is one of the manufacturers that still uses coal to produce nitrogen. Originally it was said they shut down coal plants to clear up air quality for the Olympics. However, Rosenbusch thinks there is more to the story with moves by the government to protect the domestic Chinese producer. 

Another significant event was the airline hijacking in Belarus and the resulting sanctions. These included a shutdown of port access. Since Belarus is one of the largest potash producers, at 20% of global production, sanctions on the landlocked country put that product offline. 

Later came the crisis in Ukraine. Rosenbusch recalled Feb. 24, 2022; the day Russia invaded. He was in Zug, Switzerland, the mineral trading capital of the world and headquarters to many large Russian fertilizer companies who are substantial players in the market.  

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“It was as if I had arrived at a funeral,” he said. “Their employees were crying. Everyone was fearful of their future. Were they going to have a job? Was their company even going to exist? It was incredibly dramatic that morning watching their reaction.” 

Within months we saw a complete shutdown of all Russian fertilizer when oligarchs were sanctioned – making it impossible for them to trade with the world. Rosenbusch said we are missing the big story here, which is natural gas. 

The building block of ammonia is natural gas, and roughly 80 to 90% of the cost of fertilizer production comes from natural gas. During this volatile time, natural gas was blocked from coming into Europe. Rosenbush said that almost 70% of European nitrogen got shut down at some point, because they could not produce ammonia with the available natural gas rates. 

To sum it up, “Geopolitics have a huge impact on what we do, and we must pay attention to it. More so now than ever, people around the world understand the important role fertilizer plays in food security. It is an important link that we must emphasize when we tell our story.” 

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U.S. disruptions and sticker shock

Here in the U.S., Texas, Oklahoma, and Louisiana are responsible for 60% of all nitrogen production, and recent weather events impacted it. 

Hurricane Ida adversely affected natural gas production in Louisiana when plants were shut down. Then the 2022 winter freeze hit hard, and Rosenbusch reported a trackable 20% dip in nitrogen production due to those shutdowns during the cold freeze time. 

He also discussed the demand side of the market, where we have seen strong commodity prices. 

“When you have strong crop prices, you have farmers who want to increase yields. That increases the demand for fertilizer, which of course makes prices go up. So, you take the supply challenges along with greater demand and that was a big factor which led to the current market situation.” 

Legislators have attempted to help. In the past year, the U.S. federal government invested $500 million to increase fertilizer supply. While this funding brought positive benefits, it was still not enough to increase fertilizer for the U.S. farmer. 

Then there is the sticker shock, which Rosenbusch attributes to the low market dynamics preceding the current situation. Fertilizer prices were at their lowest before all this volatility, which made the price runup especially painful on the farmer’s checkbook.  

Moving forward, he expects the market to stabilize but does not anticipate a return to the decade-low fertilizer prices. 

“I can tell you that a lot of the market conditions we are seeing today are different than what we saw back in 2008. We will see some volatility but not wholesale changes. Expect to see some market stabilization but not necessarily at those decade-low dynamics experienced before the runup,” he forecasted. 

Other disruptions to consider

In addition to geopolitical issues, Rosenbusch continued his talk and challenged listeners to consider what is coming next in the fertilizer industry.  

“I want you to be thinking provocatively about the disruptors that are going to continue to impact the market moving forward,” he said. 

Product innovations are coming at a rapid pace. The influx of products leaves retailers to determine what works, what does not, and then educate and convince farmers on how to use them.  

In addition, there is innovation in taking traditional products and using them for other sources. He said, for instance, hydrogen will be a growing fuel source in the future. It is low-carbon and safe in the form of ammonia. 

“What if in 10 to 20 years, ammonia producers are no longer generating their revenue from fertilizer sales but as a hydrogen energy provider? They say it is a completely different market with a completely different end use. But you would have to think that some sort of dynamic will exist between selling ammonia as a low-carbon hydrogen fuel source versus selling it as a fertilizer,” he projected. 

Moving on, he played a video about vertical farming. These impressive operations repurpose commercial warehouses into high-rise, temperature-controlled farms. They are promoted to optimize lighting, minimize water, cut pesticides, and optimize nutrients to enhance production. 

“I get it – we are not going to be growing corn in vertical farms. It is not for traditional row crops, but fruits and vegetables. This is really catching on with a lot of coastal producers and consumers, and the Association for Vertical Farming now exists to help guide their future,” he said. 

Finally, he affirmed the most significant disruptor is meeting demands of the future consumer. 

“They want to know where their food comes from. Today’s generation is more disconnected from production agriculture than any generation has ever been. Consumers will reshape what we produce and how we produce it in a major way.  We all have the responsibility to tell our story and to help ensure that the consumer of today understands,” he said.