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The Fertilizer Conundrum



04 Aug 2023

The Fertilizer Conundrum

The Fertilizer Conundrum

Making the global food system more sustainable and equitable represents a huge and complex undertaking that necessarily involves difficult trade-offs. The tension between responding to short-term increases in fertilizer prices and implementing long-term strategies for combating climate change is a case in point.


NEW DELHI – The global food system is broken. Largely dominated by multinational corporations, it enables and encourages unsustainable and unhealthy production and consumption patterns and generates enormous waste across all stages of production and distribution.


The global food system also produces massive greenhouse-gas emissions, thereby inflicting substantial ecological damage, and deprives small-scale farmers in many countries of secure and viable livelihoods. Perhaps worst of all, food access remains profoundly unequal, causing extreme hunger to increase rather than decline.


Addressing this multifaceted dysfunction represents a huge and complex undertaking. Any potential solution will likely involve difficult trade-offs, given the apparent tension between responding to short-term price increases and implementing long-term strategies for more sustainable production and equitable distribution.


The global fertilizer shortage is a case in point. Prices soared in 2021, owing to the rising cost of natural gas, an essential input for nitrogen-based fertilizers, and continued to skyrocket in 2022 after the war in Ukraine triggered economic sanctions on Russia, a major fertilizer exporter. But it has become increasingly clear that companies exploited this crisis to raise prices by more than the increase in costs. A recent study by GRAIN and the Institute for Agriculture and Trade Policy finds that the profits of the world’s nine largest fertilizer companies increased from around $14 billion in 2020 to $28 billion in 2021 – and then soared to $49 billion in 2022.


It is important to note that the rise in fertilizer prices was not due to higher sales volumes. Rather, the price increases reflected “greedflation”: corporations leveraged supply shocks to increase their profit margins dramatically – from roughly 20% of sales in 2020 to 36% in 2022.


While fertilizer prices have declined somewhat since the start of the year, they remain exorbitantly high for most small farmers around the world. Farmers in predominantly low-income countries currently must pay nearly three times what they paid just a couple of years ago to fertilize their crops. As smallholder farmers sink deeper into debt, many are forced to reduce their fertilizer usage, which affects yields and threatens domestic food security. Persistently high fertilizer prices, the United Nations warned in late 2022, threaten to turn the current “crisis of affordability” into a “crisis of availability.”


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