The fertiliser supply chain situation

Chemical supply chains are often referred to as the hidden supply chains. The saying indicates, rightfully so, that when essential chemical supply chains cease to work fluidly, other supply chains are affected detrimentally, like a domino effect. Issues in one supply chain subsequentially affects all supply chains.

When looking at the current global situation of fertiliser, this is very much the case.

Supply chain issues affecting fertilisers

Global fertiliser prices are at a record high, both in global and domestic markets. Whilst much of the west began to reduce its dependence on chemical man-made fertilisers in 2007, many emerging markets have filled this space, stepping up their own agricultural output and subsequent usage of chemical man-made fertilisers. This has allowed many of the countries in question to develop trade more thoroughly, increase production and sell their produce at a more favourable price locally.

So, what has brought about the current situation? Though many have attributed the rising prices of chemical fertilisers with the current situation between Russia and Ukraine, fertiliser prices began rising already in the middle 2021.

The surge in natural gas prices in 2021 resulted in reduction of the production of ammonia, a key component of nitrogen fertiliser, naturally resulting in prices rising. Delays and disruptions in supply chains caused the price of fertiliser to rise as well. China imposed a quota on fertiliser exports, citing the need to ensure domestic availability and food security. These are some of the ingredients that have brought about the current situation pertaining to the diminished global supply of fertiliser.

Fractured chemical supply chains leading to insecurity

Throughout the pandemic, we witnessed the knock-on effects of the delays and disruptions caused by covid-19. Likewise, we are now seeing the knock-on effects of a diminished global supply of fertiliser.

Unlike other supply chains, chemical supply chains impacts are rarely just felt by those primarily interacting with them. The repercussions are felt on both micro and macro levels.

Rising fertiliser prices are likely to impact agriculture and food production globally, with farmers struggling to pay for key components necessary to their production, further adding to supply chain disruptions. Lowered production of agricultural output will in turn lead to hikes in prices of produce, and possibly lead to food insecurity. Whilst the key areas that will most likely feel the harshest impacts of these are countries in Africa, the Americas and Asia, the repercussions of it will be felt globally, as stated by UN Secretary-General António Guterres at recent talks on “Response to the Multiple Challenges to Global Food Security” in Germany on 24 June 2022. No country will be immune to the social and economic repercussions of such a catastrophe.

Further adding to the worry of the increase of food-insecure people globally, is that during that past two years, the number of severely food insecure people around the world has more than doubled to 276 million. The World Food Programme (WFP) highlights that there is a real risk of multiple famines declared in 2022, with the possibility of it worsening in 2023. This will, in turn, impact all global trade, should it continue to be a problem of such a high scale.