How Fertilizer Shortages Tie Into The Global Food Crisis

The current crisis in the Ukraine is set to create a devastating domino effect on the world’s global food chain. As supplies of food, fertilizers and other commodities continue to be cut off from Ukraine, prices are skyrocketing, causing many to go without. As one of the world’s largest food suppliers, it is estimated that Ukraine produces:

• 40% of the world's wheat
• 42% of the world's sunflower oil
• 9.7% of the world’s barley
• 16% of the world's Maize

Notably, the war in Ukraine has not only shook world grain productions but has also affected global access to fertilizers, causing further strain to an already tightened supply. Indeed, farmers are seeing such an increase in the cost of fertilizer that some have chosen to use fewer nutrients in their production or rotate crops, which is likely to reduce crop yields causing further cost increases.

Why Is The War In Ukraine Causing Fertilizer Shortages?

Most agricultural fertilizers contain three targeted ingredients for plant nutrition. They are nitrogen, phosphorus and potassium (also referred to as potash). However, Russia and its allies - namely Belarus, provide an estimated:

• 40% of the world’s export of potash
• 20% of the world’s nitrogen fertilizers 
• 48% of the world’s ammonium nitrate

This is problematic for farmers across the world. Sanctions placed by Ukraine’s western allies have caused these exports to dwindle and prices to soar. In the US, fertilizer prices are 78% higher than in 2021. For many farmers, they simply can’t afford this hike in price. 

Price Comparison

A ton of phosphorus and potassium fertilizer in 2021 cost around $450        

A ton of phosphorus and potassium fertilizer in 2022 will cost $1200

A ton of nitrogen fertilizer in 2021 cost around $500

A ton of nitrogen fertilizer in 2022 will cost $1000+

Across the west, farmers have scrambled to find cheaper alternatives. Consequently, demand for manure has catapulted, with many farmers unable to get their hands on a nearby supply. As a result, several farmers have switched seeds in an effort to secure their yields. With soybeans requiring fewer nutrients and, thus, less fertilizer, soybean seeds have seen a 4% uptake in the US than the previous year. Meanwhile, corn acres fell to a 5 year low, putting further strain on an already tightened food supply.  

Reducing Reliance on Exports:

The threat to the global food supply has not gone unnoticed. Nearly all major nations have implemented new strategies targeted at finding a fertilizer solution closer to home. Our consultants at CSG Talent have identified a particular solution which is seeing a surge in demand - potash mining.

Indeed, recent figures have indicated that in the next 30 years, demand for potash will be higher than copper, iron and oil.

What is Potash Mining?

Potash mining retrieves potassium supplies from the earth, commonly needed for agricultural fertilizers. The process involves inserting pressurized streams of hot salt water, or brine, underground to dissolve the salt beds. This liquid is then pumped back to the surface, where it is dried at a very high temperature to extract the crystallized potash.

Top 5 Potash-producing Countries:

Canada - 14 million MT

Russia - 9 million MT

Belarus - 8 million MT

China - 6 million MT

Germany - 2.3 million MT

For now, the US still relies heavily on potash imports. With Belarus and Russia producing 40% of the world’s potash, the war in Ukraine has impacted supplies significantly. Indeed, Russia’s fertilizer exports are so pivotal to the world food supply that the Biden administration purposely developed a loophole for them in his March sanctions. That said, financial sanctions still create many hurdles to fertilizer supply chains. 

Why Doesn’t The US Utilize Canadian Dominance In Potash Mining?

In recent years, the US has turned to Canadian imports of potash. However, they too are not without obstacles. In March this year, union strikes shut down corn belt connections for two days, adding more pressure on US officials to look for supply chain alternatives closer to home. 

Most recently, the US Department of Agriculture announced they would invest $250 million to support all-American fertilizer companies to reduce reliance on exports. 

In December last year, Michigan Potash received the final go-ahead for the country's largest Potash mine, valued at $65 billion. Currently, the US produces 480,000 MT of potash, but the Michigan mine could increase this number considerably. 

Meanwhile, other nations are swiftly looking for domestic alternatives too. Anglo-American firm PLC recently acquired a UK mine for $4 billion. Meanwhile, Australian Potash Limited began drilling at Lake Wells Sulphate of Potash Project (LSOP) in 2021 and is in the early stages of developing its hydrological flow model. 

Similarly, it is believed that Spain may be sitting on a goldmine of potash reserves, estimated to be around 68 million MT. While there are few potash projects currently active in Spain, this number will likely increase in the coming years.

Environmental Impact of Potash Mining

With an environmental footprint that is considerably more attractive than other major chemical fertilizers, many hail potash mining as the ‘in-time’ solution for the fertilizer crisis. Indeed, potash mining seemingly offers a long-term future profit driver in the wake of the transition away from fossil fuels. But there is a catch.

Whilst having an arguably less environmental impact than other mining endeavours, it does not mean that potash mining is not entirely problematic to the surrounding environment. For example, many Michigan residents are fearful of the new potash mine project as they believe it will impact the natural landscape with devastating effects.  

In order to collect potash deposits, a considerable amount of water is needed. The Michigan Department of Environment, Great Lakes, and Energy (EGLE) have permitted Michigan Potash to extract 725 million gallons of groundwater yearly. That’s roughly 2 million gallons a day. 

Locals fear this huge water requirement will leave their marshland dry and taint groundwater in a region where remote residents depend on private wells. Moreover, there is increasing fear that waste from injection wells could make its way into water supplies. A ProPublica investigation found that such leaks are pretty routine and become more common as systems age.

With an environmental footprint that is considerably more attractive than other major chemical fertilizers, many hail potash mining as the ‘in-time’ solution for the fertilizer crisis. Indeed, potash mining seemingly offers a long-term future profit driver in the wake of the transition away from fossil fuels. But there is a catch.

Whilst having an arguably less environmental impact than other mining endeavours, potash mining still contains many risks to the surrounding environment. For example, many Michigan residents are fearful of the new potash mine project as they believe it will impact the natural landscape - with devastating effects.  

In order to collect potash deposits, a considerable amount of water is needed. The Michigan Department of Environment, Great Lakes, and Energy (EGLE) have permitted Michigan Potash to extract 725 million gallons of groundwater yearly. That’s roughly 2 million gallons a day. 

Locals fear this huge water requirement will leave their marshland dry and taint groundwater in a region where remote residents depend on private wells. Moreover, there is increasing fear that waste from injection wells could make its way into water supplies. A ProPublica investigation found that such leaks are pretty routine and become more common as systems age.

Despite this, potash mines continue to receive significant interest across the globe. Compared to 2021, potash prices have nearly tripled and continue to grow. In 2021, the average price of potash was around $300 per ton. In 2022, prices are over $1000 per ton. Again, this cost increase has caused further supply chain issues, with the average farmer unable to afford traditional mineral-based fertilizer. Some farmers have even turned to human urine as an alternative ammonia fertilizer. A report by the New York Times revealed that “Human waste is already being used to fertilize foods you find in the grocery store.” Other alternative fertilizers include microorganisms that capture nitrogen from the air and transform it for plant use.

Using Less Fertilizer Has Environmental Benefits

However, many environmental experts have welcomed the shortage in fertilizer as a win for the natural environment. Whilst chemical fertilizers have greatly enhanced crop yields, they have received overapplication in many wealthier countries and caused severe environmental harm.

The excess fertilizer is washed off during rainfall and drains into nearby rivers, lakes and streams. Being rich in nutrients, it fertilizes vast algae blooms which deplete oxygen levels in the water, meaning it can no longer support fish or other aquatic life. This eutrophication process has caused significant problems across the US, like in the Chesapeake Bay, the Gulf of Mexico and many more.

Indeed, the war in Ukraine has catapulted farming practices (warts and all) into the mainstream. Certainly, we at CSG Talent recognize that these practices may need to be reconsidered to ensure food security and environmental sustainability moving forward. Whether this solution could be as close as our own bathrooms, we’re helping to connect talented minds who have the ability to help reform outdated practices and work towards a global solution.

Do you want to learn more about how we connect talented professionals with leading organizations? Speak to a member of our expert team now.