Fertilizer shortages threaten to spike food costs

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Prices for fertilizers are spiking across the world, with per-ton rates for some products at or near record highs, a market reality that threatens to exacerbate rising consumer costs for everything from coffee to corn and rice.

A host of factors, including extreme weather events, elevated natural gas prices, and supply chain disruptions are raising the price point for the key plant foods and making them less and less affordable for growers, analysts say.

The average price of UAN32, a liquid nitrogen-based fertilizer used widely for growing grain and other grass crops, stood at $522 per ton in the fourth week of October, according to U.S. market monitor DTN. The product jumped 18% over the average from September to reach its highest price in the 13 years DTN has gathered data from retailers.

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Anhydrous ammonia, another key nitrogen fertilizer, saw the largest month-over-month spike among eight major products tracked by DTN. The fertilizer climbed 26% from September to October to reach $982 per ton, a price point it hasn’t reached since 2008.

Overall, UAN32 is up 108% from a year ago, and anhydrous ammonia is up 131%, DTN said.

Analysts have blamed the high prices, particularly for anhydrous ammonia, in part on the landfall of Hurricane Ida in September, which closed anhydrous plants in Louisiana and sparked supply disruptions.

Perhaps the more consequential contributor is high and rising prices for natural gas, a key ingredient in fertilizer, which is making production more expensive and the prospect of pricier food more likely.

“Farmers could pass the higher cost of fertilizers on to consumers in the form of lower crop production and the subsequent higher food prices,” Alexis Maxwell, an analyst at Green Markets, told Bloomberg.

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The cost burden imposed to support more fertilizer-reliant crops has some farmers saying they may shift to others, which could tighten the supply of some crops, such as corn.

“We are generally a corn-bean rotation; rarely do we do beans on beans, but it might be a possibility on a portion of acres if fertilizer supply is tight or prices stay outrageous,” farmer Jonathan Mikkelson told S&P Global Platts. “I could also see potential for some longer corn on corn acres go to beans.”

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