FERTILISER – TO FOOD – TO FORK. The agricultural industry in the UK is under the most sweeping set of changes since the 1950s with the introduction of the Environmental Land Management Scheme (ELMS). Estimates currently stand at a 10% reduction of nitrogen fertiliser use in the UK because of ELMS2


. Consultations and


policy are occurring on farm and at industry level. One such consultation is the DEFRA Urea Enquiry3


which has been at the forefront of UK fertiliser


industry’s minds. One of the enquiry’s proposals was to ban the use of urea due to the ammonia emissions it can emit if applied incorrectly. Nitrate leaching from Ammonium Nitrate (AN) is also becoming a more prominent issue surrounding the impact of artificial fertiliser on the environment. The production curtailment across Europe highlighted the significance of AN fertiliser in crop production but has also embedded the importance of other nitrogen products including Liquid Urea-Ammonium Nitrate (UAN) and granular urea as options to both the UK and European farmer. Multiple sources of nitrogen in the market offers choice to the farmer to optimise best practice, reducing environmental impact and increasing farm profitability. The curtailment of production also highlighted the importance of the fertiliser industry in downstream food production as CO2, a by-product, is used in meat processing, food packaging and carbonating drinks.


Across Europe attempts began to be made to aid the agriculture industry. For example, the Polish government removed VAT on fertilisers to help mitigate these higher prices for farmers. Other governments were more direct and agreed deals to restart plants to avoid immediate crises. The potential knock- on impact on the quality/quantity of crop production from the increased cost of fertiliser, however, has remained ignored. During the same period, UK farmers have also been facing continued reductions in their Basic Payment Scheme (BPS) which ELMS is to replace. Prices of nitrogen fertiliser reached a level where continued production was viable and the damage to the market during Q3/4 of 2021 was an estimated 12mln t of lost supply across Europe. Currently production remains curtailed and continues to support maintained higher pricing for Ammonium Nitrate based products across Europe whilst natural gas continues to remain above historical norms.


The implication of these events across Europe is that we have seen the highest fertiliser prices, above and beyond the previous high set in 20084


.


Supply within the region continues to be curtailed and imported products from other regions are becoming more attractive as supply of granular urea becomes more readily available. Volatility is anticipated throughout the coming months as trade flows continue to alter. The world’s largest buyer, India, is reducing its expenditure for fertilisers5


whilst the world’s largest


manufacturer, China, is planning on lifting export restrictions in June 20226 . This spring, concerns over crop quality due to unattractive risk-reward are circulating. Whilst the current crop price is viable for some to absorb the higher costs incurred, the aftermath of price surges are yet to be seen. Europe could continue to face unprecedented fertiliser costs. If cereal prices don’t maintain their current historically high prices, the fall-out could be catastrophic. As the Polish proverb goes… ‘If the farmer is poor then so is the whole country’.


James Cook E: james.cook1@adm.com


2 Industry Estimates 3 Solid Urea Fertilisers Consultation Document_Nov 2020.pdf (defra.gov.uk) 4 Anderson Centre Historical Data


5 Fertiliser subsidy for 2022-23 is less than expected, says ICRA - The Economic Times (indiatimes.com)


6 Soaring fertilizer prices add to inflationary pressures and food security concerns (worldbank.org)


17 | ADMISI - The Ghost In The Machine | Q1 Edition 2022


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