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Dependence on Russian fertilizers, the economic “second shock” of this war

Here’s a very good explanation from Agence France-Presse (AFP) on what it calls “the second economic shock” caused by the Russian invasion of Ukraine, “that of fertilizer”.

What is fertilizer?

Fertilizers contain nutrients to nourish plants and promote their development. They can be of organic origin (nettle manure, slurry, chicken droppings, etc.) or of mineral origin: made from nitrogen (N) in the air or minerals extracted from the subsoil, such as phosphorus (P) and potassium (K).

The vast majority of European farmers use “NPK” mineral fertilizers, especially nitrogen. The International Fertilizer Association (IFA), which unites the global fertilizer industry, estimates that 85% of the world’s soils lack nitrogen, an element that “plant growth engine”

Nitrogen fertilizers are made from ammonia, obtained by combining nitrogen from the air and hydrogen from natural gas. Nearly 80% of the cost of ammonia production is linked to the use of gas. There are different types of these fertilizers: in liquid form (nitrogen solution) or in granular form (ammonium nitrate and urea).

“Russia was the first exporter of nitrogen fertilizers in 2021 and the second supplier of potassium and phosphorus fertilizers”recalls the Food and Agriculture Organization of the United Nations (FAO).

‘Forty percent of European gas supplies currently come from Russia’providing “25% of the European offer” in nitrogen, potassium and phosphate, the 1 . warneder March Svein Tore Holsether, CEO of Norwegian Yara, the world’s largest producer of mineral nitrogen fertilizers.

The European Union consumes every year “more than 11 million tons of synthetic nitrogen”, according to a recent report by Green MEPs. It is therefore dependent on Russia both for its gas and for its direct fertilizer imports; Brazil remains the largest importer of Russian nitrogen fertilizers.

Price peak continues

The price of mineral fertilizers has continued to rise, in the wake of the increase in natural gas. “Prices of urea, a key nitrogen fertilizer, have more than tripled in the last 12 months”according to the FAO.

The Russian invasion of Ukraine has again pushed up the price of gas and the nitrogen solution, which cost about EUR 600 per tonne in the European market at the end of October, has now reached EUR 800, “a recording”urges Isaure Perrot, advisor at Agritel.

Under these circumstances, Yara announced that it would temporarily reduce its production in France and Italy, and the president ruled: “critical” that the international community “works to reduce dependence on Russia”

The potential risk of a shortage continues to be eclipsed by fears about supply capacities given the astronomical cost of fertilizers: “In Western Europe, farmers are generally covered for spring sowing, but the question arises for the 2023 campaign”warns Edward de Saint-Denis, estate agent at Plantureux and associates.

today, and “despite rising grain prices, it is not profitable to buy fertilizer for 800 euros per ton”adds Isaure Perrot.

Europe will have to turn to other sources: “There is gas in Algeria, in the United States – but at what price? – and also in Iran or Kazakhstan – but will we want to buy from these countries? †asks perrot.

For potash, nearly 40% of which is imported from Russia and Belarus, Europe could turn to Canada, which is already the main supplier, but at higher prices, or to Israel and Jordan, grain traders believe.

The EU could also increase its phosphate input, of which China, Morocco and the United States are the largest producers, but, they point out, this will not replace the nitrogen on which high European yields are based.

Alternative roads will be dug for Isaure Perrot if the crisis continues, such as crop modification, favoring legumes, sunflower or soybeans, which use less nitrogen than wheat and maize.

Yara, for its part, wants to produce 30% of its ammonitrates from the hydrolysis of water from 2023 – and not from gas. One “green hydrogen” still very expensive, but which would make it possible to free ourselves from both fossil fuels and dependence on Russian gas.

Also read: Energy and raw materials: “We are killing our money”, rising prices wake up French industry