Starting in February of 2021 with the Texas Arctic blast and continuing through August of 2021 with Hurricane Ida, US fertilizer production was disrupted. Shortly after, in November of 2021, record natural gas prices halted the production of nitrogen fertilizer in most of Europe. One disaster after another since 2021 has impacted fertilizer production and fertilizer distribution. Now we sit on the precipice of a possible global fertilizer shortage which will inevitably lead to food shortages worldwide.
Back in November of 2021, farmers were withholding purchasing nitrogen fertilizer due to record prices. This is unusual because applying fertilizer before winter reduces the farmers spring workload when most of the time they must be tilling and planting. Global nitrogen fertilizer sales are up 80% from 2020.
All of the farmers that waited to purchase fertilizer in November of 2021 due to high prices are finding now, in March of 2022, that fertilizer prices are only continuing to climb. This is prompting concerns that there may be a global famine, as farmers will now have to decide if they will plant and what crops they will plant which need less or no fertilizer. The spring planting may be reduced severely. Fertilizer prices tend to go up almost 10% week over week according to Green Markets North America’s Fertilizer Price Index. Prices are 40% higher than they were before the difficulties in Europe. This spike in prices helps to reveal how many of the world’s crops are dependent upon Eastern Europe for exports of fertilizer and food. Western sanctions have only made worse the fertilizer shortage worldwide. Eastern Europe was the top exporter of fertilizer in the year 2019. It exported nearly $9 billion dollars’ worth of fertilizer in that year.
Now, in addition to The United States producers of fertilizer being affected by the difficulties in Eastern Europe as well as high prices, rail lines will be reducing the shipments of nitrogen fertilizer. This will delay the delivery of nitrogen fertilizer during a critical time. Farmers will not be able to receive delivery of nitrogen fertilizers in time for the spring application season. This will adversely affect the growing season of 2022. CF Industries is the largest producer of urea in North America and ships to customers via the Union Pacific rail line. These rail lines serve key agricultural areas in the middle of America as well as Texas and California. Products such as urea and urea ammonium nitrate will be primarily affected, but so will diesel exhaust fluid which is required by the EPA for diesel trucks.
“The timing of this action by Union Pacific could not come at a worse time for farmers,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “Not only will fertilizer be delayed by these shipping restrictions, but additional fertilizer needed to complete spring applications may be unable to reach farmers at all. By placing this arbitrary restriction on just a handful of shippers, Union Pacific is jeopardizing farmers’ harvests and increasing the cost of food for consumers.”
On April 8th, Union Pacific informed CF Industries it was mandating certain shippers to reduce the volume of private cars on its railroad. The company was told to reduce shipments by 20%. CF Industries believes it will be able to make delivery of product already contracted to be shipped via Union Pacific railways. However, they do expect delays and may not have the shipping capacity to take in new rail orders on Union Pacific rail lines.