Global Fertilizer Challenges Impacting The World Would Have Been Disastrous For Ghana If Not For Dr. Akoto’s Sterling Leadership
Crops are the basis of our food system, whether feeding us or animals and without secured supply in terms of volume and quality, our food system will go bankrupt. Crops rely on a good supply of nutrients to deliver high yields and quality, which in modern farming systems come from manufactured fertilizers.
We are currently witnessing the beginning of a global food crisis, driven by the knock-on effects of a pandemic, and more recently, the rise in fuel prices and conflict in Ukraine. There were already clear logistical issues with moving grain and food around the globe, which will now be considerably worse as a result of the war.
Russia and Ukraine are also major producers and suppliers of fertilizers and raw materials. For example, Norwegian group Yara, the biggest producer and supplier of fertilizers in Europe, makes much of its product in Ukraine. Reducing western trade with Russia, and the disrupted supply lines in Ukraine will therefore add another layer of pressure to the production and supply of fertilizers.
Russia and Belarus are the world’s second- and third-largest producers of potash, a key ingredient for producing nitrogen-containing fertilizers, after Canada. This has as well affected the global supply of fertilizer due to Belarus, which exports potash through Lithuanian ports, has been hit with export sanctions after it permitted Russian troops to stage and enter Ukraine across its borders.
Last year, China tightened its controls on exports of fertilizers, primarily nitrogen and phosphate, effectively shutting off the supply to the global market through to June this year to try to limit a rise in domestic food prices. Beijing’s move exacerbated a shortage of global supplies and helped contributed to a surge in prices across international markets. While the loss of Chinese, Russian and Belarusian exports have pushed fertilizer prices up further, a labour dispute at the Canadian Pacific Railways is expected to aggravate shortages.
The global food system was already under pressure. Note, during the pandemic, as many economies emerged from lockdowns and recovered, the rapid rise in activity increased the energy demand. The spike in gas prices triggered a pause in the production of fertilizers at some UK facilities in 2021, causing a rise in prices. More over, Yara announced in September, 2021 that, it was curtailing production because “record-high natural gas prices in Europe were impacting ammonia production margins”. Gas prices had indeed surged globally as demand rebounds from the pandemic, after a long cold winter has left storage stocks unusually very low. Demand had been particularly high in Europe because of the low wind speeds that had hurt wind power generation and increased reliance on burning gas for electricity.
So with the current conflict in Ukraine leading to sharp rise in fuel prices, it is as well directly impacting the prices of fertilizers, which helps to explain why the United Nations Food and Agriculture Organization (FAO) food price index reached its highest ever value in February – and is rising at the highest rate since the 2008 financial crisis.
Consequently, the cost of producing nitrogen fertilizer is directly linked to the cost of fuel. This is why the UK price of ammonium nitrate has climbed as high as £1,000 per tonne, compared to £650 some periods ago.
In furtherance, prices for raw materials that make up the crop nutrient commodity market – ammonia, nitrogen, potash, urea, phosphate, sulphate and nitrate – have risen 30% since the start of the year, and are now higher than the levels reached during the food and energy crisis when prices jumped in 2008, according to CRU, a UK-based commodity consultancy. Prices of Nola urea, one of the easiest fertiliser commodities to track, is also trading at a 34-year high of $880 a US ton – in 2020 the price was $182. Prices are up 60% since Russia’s invasion of Ukraine on 24 February.
Therefore, to remain profitable, farmers will need to keep a particularly close eye on production costs, but higher prices for grains at harvest will in turn exacerbate inflationary pressures in the economy since the supply chain will eventually transfer the costs to the consumer in the form of higher food prices.
With the above global supply chain constraints coupled with the current geopolitical landscape, Ghana can not insulate herself from the impacts of these global events which she has no control over.
In spite of the above, it is worthy to note that, under the sterling leadership of Dr. Owusu Afriyie Akoto, Ghana has witnessed the largest increment in fertiliser import and application under the fourth Republic. And this has been possible as a result of the introduction of the Government’s flagship Planting for foods and jobs (PFJ) programme.
The data on the imports of fertiliser from 2015 - 2019 in Ghana is shown below:
Prior to the Covid-19 pandemic, food prices in Ghana were relatively cheap so the current marginal increase in food prices can only be attributed to the external factors of which Ghana has no control over; the Covid-19 pandemic, global crude oil price increases, Russia- Ukraine conflict, ban on export of fertiliser by some nations, among others.
In fact, if not for the ingenuity of the PFJ programme timely put in place by the exceptionally competent and intelligent Agric Economist, Dr. Owusu Afriyie Akoto, Ghana’s Minister of Food and Agriculture, at this crucial moment of the global crisis, the situation of Ghana would have been as disastrous as that of the many other countries across the globe experiencing worsening food insecurity.
Reference
Bloomberg: Fertilizer Shortages Due to Russia-Ukraine Tension May Hit U.S. Growing Season
Bloomberg: Nitrogen Shortage to Force U.S. Farmers to Scale Back Fertilizer, CF Says
Financial Times: Gas price surge triggers UK fertiliser plant closures and crop warnings
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