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The year 2022 saw a spike in fertilizer costs, up to triple what it was in 2021. With a gloomy outlook on 2023 prices, would it be a bad idea to advise your customers to lock in rather than wait? Couldn’t hurt.

With record high gas prices, the ongoing war between Russia and the Ukraine, and global political sanctions, it is a wonder when the world will get back to normal.

Even if Russia were to stop its war, global sanctions imposed by most countries on the planet would still be in effect until it can be sure no underhanded politicking is being played.

Russia, is one of the larger global suppliers of fertilizers. Per The Fertilizer Institute, in 2021, before invading Ukraine and being slapped with global economic sanctions, for countries around the world, Russia supplied:

  • 23 percent of ammonia exports;
  • 14 percent of urea exports;
  • 10 percent of processed phosphate exports, and;
  • 21 percent of potash exports.

At the 2022 Fertilizer Canada Annual Conference in Halifax, Nova Scotia, it was noted that in 2021-22, 85 percent of all eastern Canada urea was sourced from Russia.

Although providing different numbers, Morgan Stanley noted that Russia exported 11 percent of the world’s urea and 48 percent of the world’s ammonium nitrate. Additionally, Russia and Ukraine combined exported 28 percent of all fertilizers made from nitrogen and phosphorous, as well as potassium.

Canada produces 12 percent of the world’s fertilizer supply and exports to over 75 countries every year, according to the Government of Canada’s website data from June 2022. Canada maintains its grip as the world’s largest producer and exporter of potash, having the world’s largest potash reserves of 1.1 billion tonnes of potash.

Potash, aka potassium, is one of the three major nutrients that plants require for healthy growth, the others being nitrogen and phosphorus. Bulk blended fertilizers use a percentage mix of these three ingredients.

Although it is easy enough to suggest that this is an opportunity for the Canadian fertilizer industry to jump in, it is not an easy thing to suddenly ramp up output.

Another factor to examine is the predictive overuse of fertilizer: drought.

The US 2022 harvest, as of mid-October, is the driest on record, with the country at 81.78 percent drought coverage. The previous high was experienced in 2012 when the drought numbers peaked at 80.76 percent.

According to the Risk Management team featuring Moe Agostino, the Chief Commodity Strategist, and Abhinesh Gopal, the Head of Commodity Research, drought in Canada, the US, and Argentina is getting worse, a trend that will continue into early 2023.

Drought measurement is a key indicator of soil moisture, vegetation health, temperature, evaporative demand, and more.

The Risk Management team noted that with above-average temperatures and below-average precipitation in September of 2022, the Canadian Prairies are experiencing an intensified summer-long drought.

The Government of Canada’s Agriculture and Agri-Food Canada department indicated via its Normal Soil Moisture map of October 10, 2022, that much of western Saskatchewan and central and northern Alberta are showing less than 40 percent of the normal soil moisture expected.

For reference, when compared to the same week in 2021, there is a larger area of the Prairies affected in 2022.

The Canadian Drought Outlook provides a monthly drought forecast.

For the end of October 2022 (see below right image), it predicted that small pockets of southwestern Ontario and large swaths of Alberta and Saskatchewan would see the drought conditions worsen. Other areas of Alberta and British Columbia are also expected to develop drought-like conditions.

Up north, the Outlook predicts the Yukon will develop drought, while the Northwest Territories will see a worsening of drought conditions. The territory of Nunavut will not experience drought.

While drought is never a good thing, it is good news for farmers and their plans—sort of.

Yes, a drought can affect the current year’s yields regarding: plant quality as the moisture and nutrient uptake is hindered at levels depending on the type of crop being grown. It will also play into next season’s crop planning and nutrient management, often resulting in unused nutrients left in the soil by a plant unable to effectively utilize them.

But because dry conditions have a lasting effect, the nutrients left in the soil from the previous season’s dry weather means a farmer will require upcoming fewer inputs. Less fertilizer may be required in 2023 by the areas hit hardest by drought conditions in 2022.

Make sure to explain to your customers that professional soil testing by an agronomist should still be applied in the new year to get a better grip on what nutrient levels are still in the ground. Knowing this will allow the farmer to avoid over-fertilization, saving them some money, and creating a more positive environmental impact.

In dry soil conditions, the need for nitrogen may promote higher protein levels by up to 18 percent. High protein can make some crops inedible for human consumption, but can still be used for animal feed—but at a reduced price for that crop.

When a farmer has a better understanding of where the nutrient levels are within the farm’s soil. and it can vary a lot on a per acre basis, allowing them to devise a better plan for the upcoming growing season, especially for crop nutrition.

It’s not just a single-year plan either. When soil sampling is done throughout the year, the data can help farmers make informed decisions during other drought seasons to make appropriate rate changes for each nutrient so the plant can respond optimally, regardless of what Mother Nature throws at it.

During dry conditions, potassium, for example, is a much-needed nutrient that will allow crops to open and close the cuticle when needed. Nutrients such as nitrogen, potassium, and phosphorous can build up in the soil over time.

For farmers who have learned that their soil has a high nitrogen level, a recommendation of a crop rotation to a plant better able to handle the level will be much appreciated.

For 2022, many farmers in North America attempted to create their own fertilizer substitutes fearing they would be unable to afford their usual mix. They used high phosphorous content materials such as rock phosphate, bone meal, bat guano, fish meal, cottonseed meal, manure, and compost, to name just a few.

Economic sanctions against Russia, along with an inability to mine and ship product from Ukraine, have created a shortage of fertilizer materials globally, which has grossly inflated the cost of fertilizer.

We should point out that not every country in the world is abiding by sanctions against Russia. Both China (which has its own supply of fertilizers), and India, are purchasing fertilizer from Russia—both feeding the Russian war machine and providing fertilizer to its citizenry to feed themselves and their international export allies.

Keep in mind that with a population of 1.43 billion in China, and 1.42 billion in India as of summer 2022, it’s possible that by the time this issue is published, India will become the most populated country on the planet. With the global population projected to reach eight billion by November 2022, these two countries will be responsible for 36.25 percent of it.

The Farmer’s Business Network, Inc. (FBN), a farmer-to-farmer network and e-commerce platform based out of San Carlos, California, recently delivered its first Fertilizer Price Transparency Report.

“With natural gas prices still high and major market disruptions due to the Russia-Ukraine war, we don’t expect fertilizer prices to normalize in time for farmers’ 2023 crop planning,” said Kevin McNew, FBN’s Chief Economist.

“The widespread regional variation in fertilizer prices—about twice as much with nitrogen fertilizers as potash fertilizers—could be symptomatic of the same lack of transparency FBN has previously exposed in other input markets such as seed. A lack of price transparency can impact ROI significantly, tighten operational budgets, and make crop planning for next year even tougher for farmers in an already challenging environment.”

Key findings within the FBN report included:

  • Fertilizer costs will cause farmers to adjust application rates and cropping choices postharvest and into the next growing season;
  • Over the past two years, urea prices have increased by 200 percent, and DAP (Diammonium Phosphate) prices by 112 percent;
  • 17 percent of FBN farmer members surveyed said they would lower their application rates this fall, suggesting that fertilizer cost increases (along with the mid-west drought) may be constraining some farmer application rates;
  • Farmers that apply more nitrogen fertilizer, are more affected by high fertilizer prices;
  • 12 percent of responding farmers indicated planting would decrease;
  • Member farmers indicated they were more apt to increase corn acreage in 2023 (24 percent), edging out soybean acreage (22 percent).

Although that content has been plucked from US data, the results across the board for Canadian ag concerns remain similar.

The bottom line is fertilizer prices are not coming down anytime soon. Certainly not soon enough for the 2023 growing season in Canada.

Tell your farm customers, if they have not already, to lock in now with their fertilizer needs to better ensure on-time delivery.

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