The pace of the increase in fertiliser prices, in particular nitrogen, in the past three months has been remarkable, if not unprecedented. Market analysts note that limited volumes of CAN and urea are currently trading, with prices continuing to trend upwards.

The sense is that the international fertiliser trade is very much a seller’s market, with buyers having little option but to accept producer prices and book volumes of product or face doing without.

The introduction of export quotas on nitrogen fertiliser, primarily ammonium nitrate, by Russia for a period of six months from 1 December is likely to weigh on markets.

Analysts predict that the 5.9m tonne export quota will result in a shortfall of 3-7% on average Russian exports over the past three years.

While small, the shortfall is significant in the context of a tight global market. The pre-emptive measure is to ensure that Russian producers don’t take advantage of increased returns internationally over Russian markets.

The government has already introduced price caps on ammonium nitrate to curb price increases in the domestic market.

This development follows moves by China in October to halt fertiliser exports given low production rates and low inventories.

Energy prices

Low stocks and limited supply growth related to Covid-19 manufacturing disruptions, coupled with strong demand, underpinned fertiliser price increases from the start of 2021.

However, increased energy prices, gas prices in particular, resulted in a price surge in quarter three this year, which shows no immediate signs of relief. Soaring gas prices in Europe resulted in curtailment of fertiliser production across Europe.

Natural gas is a key ingredient in the production of ammonia, accounting for 80% of production costs. Lower supplies of natural gas, coupled with unexpected higher energy demand as economies rebounded from Covid-19 lockdowns, have fueled gas prices. There appears to be no immediate end in sight to the gas crisis in Europe.

Russia, on whom Europe has become increasingly reliant on for gas supplies, has indicated more than once that gas supplies would increase but to no avail.

Politics at play

Geo-political influences appear to be exacerbating the situation. Germany’s temporary suspension of certification of a new gas line between Russia and Germany has sparked gas prices again.

Russian state gas company committed to begin filling their storage facilities in Germany and Austria by November 8, providing hope of increased exports to Europe. Analysts noted that while refilling began, it was from existing gas flows, so essentially gas supply has not increased.

Last week, Belarusian president Alexander Lukashenko threatened to cut off European gas supply through his country should Europe impose further economic sanctions on Belarus given the deepening migrant crisis on Belarus’s border with Poland. This pipeline accounts for 20% of Russian gas to Europe.

Europe’s dependency on imported energy, which has been growing for decades, is at the core of this crisis and has been a key driver in the surge in fertiliser prices.

Curtailment of nitrogen production across Europe has contributed to a global tightening of supplies.


There is little evidence in the market that fertiliser prices will retreat in any meaningful way in the near term. Most analysts predict the market will not turn until after Quarter 1 2022, which appears conservative. There is concern that some production curtailment in Europe may become permanent with production moving elsewhere.

It is reasonable to consider that when the market does turn, there may be a continuation of high prices, albeit not at the current peak levels, for some time as production and the market regularises.

Farmers will be challenged with both limited supplies and significantly increased costs for at least the next six months, but realistically maybe beyond. Russia’s policy to prioritise domestic farmers gives it a distinct market advantage and contrasts with the lack of policy support for EU farmers in dealing with this crisis.

The extent of the crisis was brought into sharp focus last week when executive director of the UN World Food Programme, David Beasley, highlighted food supply as a contributing factor to the growth in numbers of people acutely hungry in the world.

“Fuel costs are up, food prices are soaring, fertiliser is more expensive and all of this feeds into new crises like the one unfolding in Afghanistan, as well as long-standing emergencies like Yemen and Syria,” said Beasley.

In total, 45m people are currently on the brink of starvation. This number has risen from 27m in 2019.