Fertilizer shortage
The current food shortage is being driven by another key shortage: one in fertilizer. The addition of inexpensive chemical fertilizer to developing countries' fields, as much as anything else, has driven a worldwide trend to more abundant crops and low-cost food. No longer, according to a recent New York Times article ("Shortages Threaten Farmers' Key Tool: Fertilizer", 4/40/08).
According to the article, prices for some kinds of fertilizer have tripled over the last year. Even in the US, fertilizer is in limited supply so even farmers who can afford higher prices (thanks to high crop prices) can't always get as much as they need. The situation in places like Senegal and the Philippines is far worse.
As the article notes, "The demand for fertilizer has been driven by a confluence of events, including population growth, shrinking world grain stocks and the appetite for corn and palm oil to make biofuel. But experts say the biggest factor has been the growing demand for food, especially meat, in the developing world." The demand for fertilizer is growing by 5% a year, far faster than the ability of the companies in the industry to supply it.
Aside from traditional use of manure and other organic materials for fertilizer (far less efficient), fertilizer mainly consists of either mined materials (most notable phosphate and potash), and manufactured fertilizers (moistly nitrogen combinations like ammonia and urea).
And, as with other areas of looming resource shortages, fertilizer is in increasingly in the hands of oligopolies of producers and suppliers (sometimes the same companies_.
The big producers are:
- Yatra International, spun off by Norsk Hydro in 2005
- Uralkali Fertilizer, the main Russian supplier
- Agrium, the Canadian company just making large acquisitions, a major supplier of nitrogen products, a major distributor in North America
- K+ S AG, a German company spun off from BASF
- Potash Corp. of Saskatchewan (PCS), which holds the world's 'largest potash reserves
- Mosaic, another Canadian company owned in part by Cargill with strong holdings in potash and phosphate mining
Even more significant, a trading association called Canpotex Ltd., looks after the Asian interests of Agrium, PCS, and Mosaic.
All of these companies have seen record profits in recent quarters, as prices of the commodity they sell have skyrocketed. More than with oil, but as with iron ore, copper, and agricultural seeds, this is a sector that is increasingly dominated by a few companies. The incentive has to be strong to prolong the fertilizer crisis as it is such a good money earner. While some new players may arrive in the nitrogen product section, it is estimated that the building of new plants for such processing will take several years, and the companies already with expertise and deep pockets are likely to be the developers.
