Global food security fears over high fertiliser prices, low stocks

Key crops, from Brazilian corn to Malaysian durians, are at risk after tight supplies and blistering prices of fertiliser have caused farmers to scrimp on vital crop nutrients, adding to global food security and inflation fears.

Fertiliser costs soared this year amid rising demand and lower supply as record natural gas and coal prices triggered output cuts in the energy-intensive fertiliser sector.

Urea surged more than 200 per cent this year while diammonium phosphate (DAP) prices have nearly doubled.

With global food prices at their highest in more than a decade, rising fertiliser costs will only add to pressures on food affordability, especially in import-reliant economies, while stretched budgets leave little room for government subsidies, said Frederic Neumann, HSBC’s co-head of Asian economics research.

“At a time when Covid-19 already decimated the lives and livelihoods of untold millions, soaring food costs are hitting the poor especially hard,” he said.

“This raises the risk that higher fertiliser costs will not only hit farmers but will also be passed on to consumers via higher food prices.”

With the United Nations Food and Agriculture Organisation’s (FAO) food price index at its highest since 2011 – when high food prices helped foment the “Arab Spring” uprisings – the world’s farmers are already under strain to increase food supply.

But analysts say fertiliser supply tightness will worsen early next year. European, North American and North Asian farmers all need to step up purchases ahead of spring planting, while key producers China, Russia and Egypt have curbed exports to ensure domestic supplies.

“Most stockpiles of urea are now secured, meaning global producers will be ‘sold out’ until January 1,” said US-based Josh Linville, director of fertiliser at StoneX Group.

“Producers start the new year very low on unsold inventories and they will be met by sizeable global demand in Q1 as US, Canada, Brazil, Europe, Asia all step forward to purchase.”

In response, farmers across the world are either delaying purchases or reducing fertiliser use to save money.

India and Egypt – both major farm economies – increased government subsidies in November, with India’s fertiliser ministry boosting supplies to districts with low stocks to ensure availability for winter-planted crops.