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April 14, 2024
Agribusiness Featured

Food prices could reach record highs due to jump in fertilizer prices

With agricultural costs being driven to new highs due to a shortfall of nitrogen fertilizer worldwide, farming communities in North America are opting to defer purchases, increasing the possibility of a springtime surge in demand for fertilizers and seed prior to the planting of crops.

Nitrogen fertilizer is used to increase the growth of crops, such as corn, wheat, and canola. Steeper pricing of fertilizers may well lead to breads and meat products becoming costlier for consumers, notes economists.

The United Nations food agency has stated that the cost of food worldwide has reached their highest prices in a decade during the month of October, accompanied by spikes in the pricing of plant-derived oils and wheat.

Meanwhile, the manufacturing of fertilizers in the United States has been hindered by severe winter storms in Texas during February, followed by Hurricane Ida in August. Moreover, the price of natural gas, which is chiefly used in nitrogen production, spiked in the Europe due to soaring demand, as well as a supply shortfall. BMO Capital Markets noted that the November price per ton of urea fertilizer exceeded $1,000 for the first time.

In the United States, stocks of nitrogen fertilizer are expected to be adequate during the upcoming winter, according to Daren Coppock, the chief executive officer at Applied Research Associates. The pre-winter application of these crop nutrients lowers the amount of work to be done by farmers in the springtime.

However, with spiraling prices, farmers are postponing their purchasing, thereby raising the likelihood of very high demand for stocks during the planting season, Coppock stated.

Some $53 billion worth of nitrogen fertilizers were sold globally last year, with prices being 80 percent higher than in 2021, Argus Media noted.

Typically, the Mid-Kansas Cooperative Association would sell fertilizers to farming communities against payments made in advance, to be delivered several months later.

As pricing climbed, however, the Mid-Kansas Cooperative Association curtailed its sales, for which prepayments were completed, as a precautionary measure.

“You just do not know what the price is going to be. It has put a lot of retailers in a tough spot,” according to Troy Walker, the association’s retail fertilizer director, as quoted by The Guardian.

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