ADEBAYO ADELEKE
Fertilizers And The Food Supply Chain Adebayo Adeleke
November 2021
Fertilizers And The Food Supply Chain
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The importance of food supply to the world cannot be overstated. However, with the general economic, industrial, and structural impact of the pandemic on homes, businesses, and countries worldwide, disruptions in the global food supply chain are almost inevitable. One factor that threatens to impact the food supply chain globally significantly is the less known and less discussed fertilizer industry. Thanksgiving is tomorrow, and the bountiful part of it appears hit by food shortages. A simple representation of the situation is that the last two years have witnessed a sharp increase in the price of fertilizers. Why is that important? Fertilizers constitute a major aspect of farmers around the world, and a decline in the supply of fertilizers, leading to an increase in their price, would make the cost of producing goods significantly higher. For a variety of reasons, high fertilizer costs (not to mention possible shortages) are worrying. For starters, fertilizer is widely used; mineral fertilizers are used to cultivate a sizable amount of the world's food crops. Furthermore, similar to the importance of seasons in planting, timely availability of fertilizer is important. Fertilizer treatments assist crops more in the early stages of the planting season and throughout their first growth period. Delay or failure to apply throughout the season would almost surely result in decreased yields, causing a shortage of food and raising costs. The reduction in fertilizer supplies and pipelines in 2020 was therefore unavoidable. Due to the pandemic, Fertilizer companies were forced to shut down and subsequently struggled to reopen at full capacity owing to other constraints and practical issues. Farmers continued to produce and, as a result, demand fertilizer, aided by emergency government efforts. This is not surprising; irrespective of the state of the world, food would be in high demand.
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The rising pressure on fertilizer costs relates directly to the general impact of various supply chain difficulties and recovering demand. Fertilizer production and delivery became more difficult due to trade conflicts, clogged ports, inaccessible raw chemicals, and high freight prices. Fertilizers are divided into three categories: nitrogen, phosphate, and potassium based on a plant's macronutrient requirements. Nitrogen is the most important of them and is currently most affected by scarcity. Because of its direct relationship to natural gas prices, its price is more variable, and it is an almost inevitable expenditure for farmers. Because nitrogen fertilizer does not stay in the soil, a fresh quantity must be administered each season cycle. Other than the fluctuation in natural gas prices, there have also been other factors that have affected fertilizer supply. From inhibiting storms in the Mississippi Delta to electricity outages at companies in China, disrupted output in 2021 and the temporary closure of European fertilizer facilities. Intervention by the government has also had a role. Russia (the world's second-largest exporter of nitrogen fertilizer and third-largest exporter of potassium fertilizer) and China (the world's largest exporter of nitrogen and phosphate fertilizers) have announced plans to ban or restrict fertilizer exports until June 2022, well beyond the spring planting season. Reduced availability on the export market will drive up the price of all fertilizers,
Fertilizers And The Food Supply Chain
regardless of source, as firms and nations compete for what is left on the market. As a result, farmers have few viable alternatives to consider going into the upcoming planting season. Irrespective of the compromise they reach, reduced harvest is inevitable. Nonetheless, the moment to decide is rapidly coming. Because fertilizer costs are so variable, fertilizer dealers have advised farmers to evaluate their soil and prepare ahead for fertilizer purchases. Challenged by reduced supplies, continuing logistic delays, and the importance of fertilizers, industry analysts believe farmers will speed up their purchases. This increases the possibility of bidding wars and buyer hoarding, which pushes up prices even more. Pessimism would be unsurprising in the industry. The optimism for the future is currently virtually as low as it was at the pandemic's peak economic shutdown in 2020. Farmers are concerned that rising input costs, such as fertilizer prices, are eroding their profit margins. In addition, they have said that they do not expect any respite in input costs in the next year. The present situation requires industry players to prepare adequately ahead of the coming year. Farmers should contact their suppliers as soon as possible to ensure fertilizer supply for the upcoming planting seasons. Without a doubt, farmers who
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contact suppliers early will have little problems with having access to fertilizers, but those who are unable to prepare would be left out. Bridging and buffering are two popular solutions for reducing supply-chain risk. Bridging refers to bridging the communication gap with suppliers in the event of a climate catastrophe. Buffering is keeping certain items on hand as a safety net and having alternative vendors in case their current ones fail. People in the supply chain industry must recognize the present trend in the food manufacturing industry and either find a way to bridge the gap, plan adequately or prepare viable alternatives.