How to manage fertilizers around the world to avoid a protracted food crisis?

How to manage fertilizers around the world to avoid a protracted food crisis?

Hiding behind the worst global food crisis in a decade, fertilizer prices have skyrocketed and remain volatile . It poses a serious threat to food security as the planting season begins this summer. So far, the war in Ukraine has affected the wheat and corn importing countries the most. But many countries, including some major food exporters, are net importers of fertilizers. Persistently high fertilizer prices could spill over into a wider range of crops, including rice, a staple that has yet to see war-related price increases. We must act now to make fertilizers more accessible and affordable so as not to prolong the food crisis.   

The World Bank’s fertilizer price index is up nearly 15 percent from earlier this year – prices more than three times higher than they were two years ago. High input costs, supply disruptions and trade restrictions are driving the recent rise. Natural gas prices started to rise last fall as tensions between Russia and Ukraine escalated, leading to widespread production cuts for ammonia, a key part of nitrogen-based fertilizers. Similarly, the rising price of coal, the main raw material for ammonia production in China, has forced fertilizer factories to cut production.

To alleviate the current food crisis, action must be taken now to sustain food production by making fertilizers more accessible and affordable.   There are several ways to do this.

First, countries should lift trade restrictions or export bans on fertilizers. Export restrictions make things worse and put fertilizers out of reach of poorer developing countries, which face the highest levels of food insecurity and hunger. As of early June, there were 310 active trade measures affecting food and fertilizers in 86 countries, of which about 40% were restrictive. This number is approaching levels not seen since the 2008-2012 global food price crisis. To facilitate trade, countries can reduce delays and reduce compliance costs by getting rid of unnecessary bureaucracy to import targeted goods.

One of the local bottlenecks of the global fertilizer trade is the financing needs of producers, traders and importers. In some cases, fertilizer buyers’ financing needs have tripled, compounding the general scarcity of local commercial bank financing in many of these markets. Short-term credit facilities and guarantees mobilized with the support of international development actors may be necessary in some cases.

Second, the use of fertilizers should be made more efficient. This can be done by providing farmers with appropriate incentives that do not encourage their overuse. For example, nitrogen utilization efficiency generally ranges from 30-50 percent. Meanwhile, the European Union’s Nitrogen Expert Panel recommends nitrogen use efficiency of around 90 percent. Subsidies that encourage excessive fertilizer use also encourage waste. Worse still, this has devastating environmental and climate change implications.

More efficient use of fertilizers can help further expand available resources, particularly in countries that need it most. Rich countries consume 100 kilograms of fertilizer per hectare, almost twice that of developing countries. Sub-Saharan Africa consumes the least at around 15 kilograms per hectare. 

There are opportunities to rework public policy and better target scarce public spending to create incentives for more productive and sustainable use of fertilizers. An example of possible transformation is the reforms implemented by the European Union’s 1992 Common Agricultural Practice (CAP). Prior to these reforms, support for the EU’s agriculture sector, such as minimum prices, import tariffs, government purchases, kept EU farm prices above world rates, which encouraged excessive fertilizer use. With the reforms, support for the EU CAP was shifted to direct payments and farm prices became more in line with world prices. These changes have increased incentives to use fertilizer more efficiently.

Third, we must invest in innovation to develop best practices and newer technologies to help increase yields per kg of fertilizer used. This includes investing in knowledge to ensure that the most appropriate fertilizer and amount are applied to particular crops. To maximize the effectiveness of fertilizers, we must also invest in soil health. Precision farming is an example of such advanced technologies currently available. Fertilization is another method that combines fertilization with irrigation and uses metered amounts of fertilizer determined by sensors. However, much more can and should be done by investing in pushing the boundaries of knowledge to ensure waste is minimized, only the right amount required for a particular plant at a given growth stage is applied. Another option is to supplement conventional fertilizers with applicable bio-fertilizers and applications. This will not only help with current supply challenges, but also reduce the impact of fertilizers on climate, soil and water resources.

Our ability to sustain global trade and the movement of fertilizers will be one of the determining factors in the length and severity of this food crisis. Policymakers urgently need to make the right choices so the world can cut short the current food crisis as  farmers begin to switch production due to challenges in fertilizers  .

Source: Jürgen Voegele

World Bank Vice President for Sustainable Development

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