Across Regions, Trends

World Bank: Fertilizer prices expected to remain higher for longer

In the third in a series of 11 blogs on commodity market developments, elaborating on themes discussed in the April 2022 edition of the World Bank’s Commodity Markets Outlook, John Baffes and Wee Chian write that fertilizer prices have risen nearly 30% since the start of 2022, following last year’s 80% surge.

Soaring prices are driven by a confluence of factors, including surging input costs, supply disruptions caused by sanctions (Belarus and Russia), and export restrictions (China). Urea prices have surpassed their 2008 peaks, while phosphates and potash prices are inching closer to 2008 levels. Concerns around fertilizer affordability and availability have been amplified by the war in Ukraine.

Baffes and Chian point out that rising natural gas prices, especially in Europe, led to widespread production cutbacks in ammonia – an important input for nitrogen-based fertilizers. Higher prices of ammonia and sulfur have also driven up phosphate fertilizer prices.

Fertilizer prices rose in response to the war in Ukraine, reflecting the impact of economic sanctions and disruptions in Black Sea trading routes. Russia accounts for about 16% of global urea exports and 12% of DAP and MAP exports.

Although urea and DAP prices have retracted in recent weeks due to lower tender offers in India as buyers await clarity on Indian fertilizer subsidies, potash prices show no signs of easing.

According to Baffes and Chian, urea prices are expected to remain at historically high levels for as long as natural gas and coal prices remain elevated. Similarly, DAP prices are projected to remain high until ammonia and sulfur prices ease.

Source: World Bank Blogs. Read the full report here
Photo: Credit Valentin Valkov/Shutterstock via the World Bank website

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