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The Global Fertilizer Supply Factors: An Overview by Michael Straumietis

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ElitesMindset Editorial Team
ElitesMindset Editorial Teamhttps://elitesmindset.com/
Suleman Siddiqui, an accomplished editor, navigates the realms of celebrity, lifestyle, and business with a distinctive flair. His insightful writing captures the essence of the glamorous world of celebrities, the nuances of contemporary lifestyles, and the dynamics of the ever-evolving business landscape. Siddiqui's editorial expertise combines a keen eye for detail with a passion for storytelling, making him a sought-after voice in the realms of entertainment, luxury living, and commerce.

Lately, there have been discussions surrounding the global fertilizer market. In this blog post, Michael Straumietis, Advanced Nutrients Founder and CEO, explores the factors affecting the global fertilizer supply chain.

First, Mike Straumietis notes that there is a fine line between domestic production and imports. The U.S., despite being the third-largest producer of global fertilizer in the world, still needs to import the three nutrients required for fertilizer, especially nitrogen and potassium (potash), to meet domestic demand. As such, fertilizer dealers and producers in the U.S. must pay the price determined by the global market for fertilizer materials and transport.

Global Ranking

According to the International Fertilizer Association, in 2018, the U.S. was second in nitrogen production, representing 11.6 percent of the global output. The leader in nitrogen production was China, which produced almost a fourth, 24.6 percent, of global nitrogen. The U.S. also ranked second for phosphate production, with 9.9 percent worldwide, behind China, which produced 37.7 percent. It was also ahead of India, which accounted for 9.8 percent of the global phosphate supply. With global potassium, Canada led all countries in producing potash, with 31.9 percent of global production. Belarus followed with 16.5 percent, and Russia with 16.1 percent.

Recently, the U.S. ranked seventh in nitrogen exports, accounting for only 4.6 percent of worldwide exports. Russia was at the top spot, with 16.5 percent of exported nitrogen. China was second with 11.2 percent, and Saudi Arabia was third with 6.4 percent. With recent global phosphate exports, the U.S. was fourth with 11.8 percent, trailing China’s 25.2 percent, Morocco’s 17.4 percent, and Russia’s 12.7 percent. For potash, the U.S. accounted for less than a single percent of global potassium exports. Canada still held the largest share with 36.2 percent, followed by Belarus with 18.5 percent, and Russia with 16.5 percent.

Other Variables Factored In

Mike Straumietis also notes that the costs of other variables have also been rising since the creation of fertilizer requires a lot of energy from production facilities to convert the raw chemical materials into the final form farmers and growers use.

Since natural gas is the primary ingredient for almost all nitrogen fertilizers, it takes an estimated 33 million metric British thermal units, or MMBtu, per material ton of ammonia to achieve this conversion. This is 70 to 90 percent of the production variable expenses in the synthesis process.

With natural gas prices experiencing a dramatic spike in the past few months, especially in Europe, many EU nitrogen plants were forced to close.

Mike Straumietis explains that, on average, nitrogen plants take around three to five years to fully construct, with a price tag of between $3 to 5 billion. When plants close and a demand surge occurs, the response time to fulfill supply through another production facility will lag from three to five years with a price tag in the $3 to $5 billion range.

Fluctuations in Costs and Production

A recent example of this is the February 2021 freeze in Texas, when natural gas production was either interrupted or redirected from the normal utilization and forced toward Texas because of a tremendous rise in demand. In 2020, the U.S. produced ammonia in 36 domestic plants and transported it around the country via barges, trains, pipelines, and trucks. However, the Texas freeze forced ammonia plants all over the states of Texas, Oklahoma, and Louisiana—which combined for approximately 60 percent of total ammonia production in the country—to shut down, effectively cutting about 250,000 tons of production.

Mike Straumietis adds that other fertilizer nutrients are also experiencing fluctuations in cost because of several factors. One of these factors is the use of high-grade equipment and gear.

Take, for instance, converting phosphate rock from a raw product to its final form for sale and usage. This undergoes a process that involves surface mining where the soil and rock covering the phosphate are removed using enormous draglines measuring up to five stories high. The draglines alone are both very large and very expensive, and they have a profound effect on overall prices.

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