How to manage the world’s fertilisers to avoid a prolonged food crisis

How to manage the world’s fertilisers to avoid a prolonged food crisis
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Hidden behind the worst global food crisis in a decade, fertiliser prices have skyrocketed and remain volatile. This poses a serious threat to food security, as the planting season starts this summer. So far, the war in Ukraine has mostly affected countries importing wheat and corn. But many countries, including some major food exporters, are net fertiliser importers. Persistently high fertiliser prices may spread to a broader variety of crops including rice, a staple which has not yet seen war-related price hikes. We must act now to make fertilisers more accessible and affordable to avoid prolonging the food crisis.  

The World Bank’s fertiliser price index rose nearly 15% from earlier this year — prices have more than tripled compared to two years ago. High input costs, supply disruptions, and trade restrictions are driving the recent spike. Natural gas prices started rising last fall as tensions between Russia and Ukraine escalated leading to widespread production cutbacks in ammonia — an important part of nitrogen-based fertilisers. Similarly, the rising price of coal in China, the main feedstock for ammonia production there, forced fertiliser factories to cut production.  

To ease the current food crisis, action needs to be taken now to maintain food production by making fertilisers more accessible and affordable. There are several ways to do this.

First, countries should lift trade restrictions or export bans on fertilisers. Export restrictions make things worse, putting fertilisers further out of reach of poorer developing countries who face the highest levels of food insecurity and hunger. As of early June, there were 310 active trade measures across 86 countries affecting food and fertilisers, and nearly 40% of these have been restrictive. This number is now approaching levels not seen since the 2008-2012 global food price crisis. To facilitate trade, countries can reduce delays and cut compliance costs by getting rid of unnecessary red tape for importing targeted goods.  

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

Second, fertiliser use must be made more efficient. This can be done by providing farmers appropriate incentives that do not encourage their overuse. Nitrogen use efficiency, for example, ranges from 30% to 50% in general. Meanwhile, the European Union Nitrogen Expert Panel recommends nitrogen use efficiency of around 90%. Subsidies that encourage excessive use of fertilisers also encourage wastage. Even worse, this has devastating environmental and climate change implications.

More efficient use of fertilisers can help ensure available supplies go further, especially to countries most in need. Rich countries consume 100kg of fertilisers per hectare, nearly twice as much as developing countries. Sub-Saharan Africa consumes the least, with about 15kg per hectare.

There are opportunities to rework public policies and better target scarce public expenditures to create the incentives for more productive and sustainable use of fertilisers. An example of the kind of transformation that is possible are the reforms that the European Union’s (EU) 1992 Common Agriculture Practice (CAP) implemented. Prior to these reforms, support to the EU’s agricultural sector — such as minimum prices, import tariffs and government purchases — kept EU farm prices above world rates, which encouraged excessive use of fertilisers. With the reforms, support to the EU CAP shifted to direct payments and farm prices became more closely aligned with world prices. These changes increased the incentives to use fertilisers more efficiently.

Third, we must invest in innovation to develop best practices and newer technologies that will help increase output per kg of fertiliser used. This includes investing in knowledge to ensure the best suited fertiliser and quantity are applied to specific crops. We must also invest in soil health to maximise the effectiveness of fertilisers. Precision agriculture is one example of such improved technologies that are already available. Fertigation is another, which combines fertilisation with irrigation, using fertilisers in measured quantities determined by sensors. But much more can and needs to be done by investing in pushing the frontiers of knowledge to make sure waste is minimised, only the right amount is applied as is needed for a particular plant at a particular stage of growth. Another option is to supplement conventional fertilisers with viable bio-fertilisers and practices. This will not only help with the current supply challenges, but also reduce the impact of fertilisers on the climate, and on soil and water resources.

Our ability to maintain global trade and the movement of fertilisers will be one of the determining factors of the length and severity of this food crisis. As farmers have started to alter their production due to challenges in fertilisers, policymakers must urgently make the right choices so that the world can cut short the current food crisis.

Juergen Voegele
July 22, 2022

Juergen Voegele is the vice president for sustainable development at the World Bank.