Phosphoric Acid and Major Fertilizer Prices have been Surging Globally

Phosphoric acid prices, along with major fertilizers, have been moving up globally. The global phosphoric acid market has faced significant disruptions due to several factors. The exclusion of Russian banks from the SWIFT payments system and insurers' reluctance to cover shipments in conflict zones have severely hampered Russia's fertilizer exports. Additionally, the closure of export routes across the European Union has further strained supplies.

Contributing to the shortages, China, which represents 30% of the global phosphate fertilizer supplies, halved its exports in 2022 to prioritize its domestic market, according to the World Bank. Concurrently, the Red Sea mayhem has precipitated a surge in energy prices, leading to a substantial 70% reduction in European fertilizer production, thereby exacerbating the limitations on global supplies.

Following the geopolitical upheaval resulting from Russia's invasion of Ukraine two years ago, fertilizer prices have been witnessing a significant surge. This sharp increase in prices can be attributed mainly to the cost of natural gas, a crucial component in the production of artificial fertilizers. Specifically, the manufacturing process of nitrogen-based fertilizers involves combining atmospheric nitrogen with hydrogen derived from natural gas, necessitating high temperatures and pressures to produce ammonia.

A combination of sanctions has further exacerbated the escalation in fertilizer prices, efforts to reduce dependency on Russian gas supplies, and overall shortages, leading to a sustained rise in natural gas prices. Analysts predict that these elevated prices are likely to persist for the foreseeable future. This has already had tangible impacts within the UK, most notably the closure of the country's largest ammonia production facility in Billingham last year, underscoring the UK's dependency on imported fertilizers and pesticides.

The persistent high costs of fertilizers are placing increased financial pressure on farmers, with broader implications for consumer food prices due to inflation. In response to these challenges, there is a growing shift towards exploring natural alternatives to chemical fertilizers.

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According to Procurement Resource, the global phosphoric acid and fertilizer prices have notably increased recently due to sanctions, supply chain interruptions, and reduced production capacities. The exclusion of Russian banks from the SWIFT system, EU export route closures, and China halving its phosphate fertilizer exports have compounded supply shortages. Energy price surges have also led to a drastic drop in European production. These factors have heightened financial pressures on farmers.