The Global Fertilizer Situation:The Global Fertilizer Situation:What Is Going On?

Nitrate & Nutrient InterconnectionsSanta Maria, CA

Robert MikkelsenInternational Plant Nutrition Institute

Merced, CA

Feeling squeezed?

Why has fertilizer price increased?y as e t e p ce c eased

• fertilizer is a world market commodity … subject tofertilizer is a world market commodity … subject to supply and demand

• Price increases are a result of:Price increases are a result of:

–Global demand is increasing

–High energy and raw materials costs–High energy and raw materials costs

–Higher transportation costsW k USD–Weak USD

–Strong commodity prices

–Export tariffs on fertilizer in some countries

FOB World fertilizer prices, monthly averages J 2000 O t b 2008January, 2000 – October, 20081,200

800

1,000

n

600

SD p

er to

n

200

400U

0Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Oct 08

Urea, Middle East DAP, US Gulf MOP, Vancouver

Source: Pike & Fischer ‘s Green Markets

Index of fertilizer prices paid by U.S. farmers, J 1995 J 2008January 1995 – June 2008

400

375

350

32500

275

250

325

300

992

= 10 From January 2000 – June 2008

Increased 268%

225

200175

150

1990

/1

y

75

150

125

100

1995

1996

1998

1997

2006

1999

2000

2003

2002

2001

2005

2008

2007

2004

July

July

July

July

July

July

July

July

July

Jul y

July

July

July

Source: NASS

World Fertilizer Consumption, ‘000 to d e t e Co su pt o , 000 t

120,000

80 000

100,000

00 t

0 000

60,000

80,000

trie

nts,

‘00

NP2O5

20,000

40,000

Nut K2O

0

Source: IFA

Global Fertilizer Consumption Forecastst 2012/13 (Mt t i t )to 2012/13 (Mt nutrients)

OO OO llNN PP22OO55 KK22OO TotalTotal

Ave. 2005/06 to 2007/08 (e)

95.5 38.6 27.6 162.12007/08 (e)

2012/13 (f) 115.6 45.7 33.0 194.3

A A l +3 2% +2 8% +3 0% +3 1%Ave. Annual Change

+3.2% +2.8% +3.0% +3.1%

Source: P. Heffer, 2008. Medium-Term Outlook for World Agriculture and Fertilizer Demand 2007/08 – 20012/13. IFA Annual Conference, Vienna, Austria

F dFood,Feed,FibFiber…

Biofuels: Continued expected growth … i i d d f d thincreasing demand for corn and other crops

35,000Ethanol 6,000

Biodiesel

20,000

25,000

30,000

n ga

llons

Ethanol

India

EU

China 3,000

4,000

5,000

gal

lons

Biodiesel

Indonesia

EU

5,000

10,000

15,000

Mill

ion China

Canada

Brazil

USA 1,000

2,000

3,000

Mill

ion Brazil

Argentina

USA

02007 2009 2011 2013 2015 2017

02007 2009 2011 2013 2015 2017

Source: FAPRI 2008

Ethanol is here to stay

World demand for foodWorld demand for food

6

8

10Population, billionsPopulation, billions

0 30

0.40

0.50

0.60Arable land per capita, haArable land per capita, ha

0

2

4

6

0.00

0.10

0.20

0.30

Source: FAO Source: FAO1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

0.001961 1966 1971 1976 1981 1986 1991 1996 2001

““ f d d ti h t i 50% b 2013•• “…“…food production has to increase 50% by 2013 and double in 30 years…”

–– (Source: Global Challenges for Humanity 2008 State of the Future(Source: Global Challenges for Humanity 2008 State of the Future–– (Source: Global Challenges for Humanity, 2008 State of the Future, (Source: Global Challenges for Humanity, 2008 State of the Future, Millennium Project)Millennium Project)

Diets are changing … more protein.ets a e c a g g o e p ote

80

90 Meat consumption, kg/capita/yr

50

60

70

80

10

20

30

40

0

10

1995 1997 1999 2001 2003

Developed World Developing World

• Requires more feed grains to produce protein

p p g

Source: FAO

– 7 kg/kg beef, 4 kg/kg pork, and 2 kg/kg poultry

World wheat plus coarse grains ending stocks 1978 2008

40

stocks, 1978-2008

253035

mption

152025

consum

Lowest 2 yrs on

1998‐2008y = ‐1.80x + 3621

r² = 0.93510

% of  y

record

0

1975 1980 1985 1990 1995 2000 2005 2010

( / )Year (2008 =2008/09)USDA-FAS, 5/2008

Low crop yields in the developing world(A 2005 2007)(Ave. 2005 – 2007)

10,000

7,000

8,000

9,000

a

5,000

6,000

,

yiel

d, K

g/h

USAChina

2,000

3,000

4,000

Cro

p y India

Brazil

0

1,000

2,000

Ri C S bRice Corn Soybean

Source: FAO

Global Nutrient DemandGlobal Nutrient Demand

Agricultural Commodity Prices(I d J 1995 100)

300

(Index: January 1995 = 100)

300

250

150

200

100

50

0

1995 1997 1999 2001 2003 2005 20071996 1998 2000 2002 2004 2006 2008

Cotton Palm Oil Sugar Wheat Maize Rice SoybeanSource: IFA

Why has fertilizer price increased?y as e t e p ce c eased

• fertilizer is a world market commodity … subject tofertilizer is a world market commodity … subject to supply and demand

• Price increases are a result of:Price increases are a result of:

–Global demand is increasing

–High energy and raw materials costs–High energy and raw materials costs

–Higher transportation costsW k USD–Weak USD

–Strong commodity prices

–Export tariffs on fertilizer in some countries

Cumulative U.S. ammonia plant closures i ith i i t l iincrease with increasing natural gas prices

30 9

257

8 Naturats

1985-1997 Ave. Price of Natural

15

20

4

5

6

al gas pricr of p

lant Gas $1.90 MMBtu

10

2

3

4

ce, $/MMN

umbe

0

5

0

1

MB

tu

1998 1999 2000 2001 2002 2003 2004 2005

Source: TFI

1998 1999 2000 2001 2002 2003 2004 2005

U.S. Ammonia Production and Net Nit I tNitrogen Imports

16

50

55

12

14

40

45

50

sN

et

8

10

25

30

35

ion

shor

t ton

t imports, %

o

4

6

15

20Mill

of total

0

2

0

5

10

1991/92 1993/94 1995/96 1997/98 1999/00 2001/02 2005/062003/041991/92 1993/94 1995/96 1997/98 1999/00 2001/02 2005/062003/04

Net imports (Imports – Exports)Ammonia Production Net imports as share of total

Source: TFI and U.S. Department of Commerce

Shipping and distribution costs increaseShipping and distribution costs increase

Baltic Ocean Freight Rate IndexJ 2008 J 2003

Change in Freight Rates

Index Jan. 2008 vs. Jan. 2003

Vessel Jan 08 vs Jan 03Capesize 453%Panamex 359%

Source: Overseas Marine Service, PotashCorp, TFI

Shipping and distribution costs increaseShipping and distribution costs increase

Rail Rates: Anhydrous Ammonia Tariff Rates - BNSF

40

45

25

30

35

40

mm

onia

15

10

20

25

$/to

n of

am

0

5

10

Jan 05 May 06 Mar 07 Nov 07 Jan 08

Source: Overseas Marine Service, PotashCorp, TFI

Jan 05 May 06 Mar 07 Nov 07 Jan 08

Falling U.S. dollar … increased cost for i t d f tiliimported fertilizer

Value of U S Dollar (Jan 03 – Dec 07)Value of U.S. Dollar (Jan. 03 – Dec. 07)

Source: USDA Economic Research Services

Food and fertilizer exports curbsood a d e t e e po ts cu bs

Export tariffs onExport tariffs on fertilizers:

• ChinaChina

• Russia

•Ukraine•Ukraine

• Belarus

E t• Egypt

• Vietnam

• Indonesia

What are the global consequences of higher What are the global consequences of higher g q gg q gfertilizer prices?fertilizer prices?

Global Consequences: Greater awareness of the role of fertilizer inof the role of fertilizer in producing food

Global Consequences: Reduction in fertilizer use …

• Shift in crops … more psoybeans

• Less P and K use … more imbalanced nutrient use

• Lower yields and less production …food prices and grain stocks

?• Better environment?

Global Consequences: Increased investment b th i d t i d ti itby the industry in production capacity

120,000

100,000

World Fertilizer Production, ‘000 t

60,000

80,000

N

40,000

P2O5K2O

0

20,000

0

Source: IFA

Global Consequence: Supply will catch up to ydemand in next 5 years

Source: M. Prud’homme. 2008. Global Fertilizers and Raw Materials Supply and Supply/Demand Balances 2008-2012, IFA Annual Conference, Vienna, Austria

ECONOMICECONOMIC

Global Frameworkfor Fertilizer BMPs

Profitability

Net profitReturn on investment

QualityResource use        Energy Profitability

SourceRate

Adoption

Soil productivity

efficiencies:

WaterNutrient

Labor

gy

ProductivityCropping SystemSustainability

TimePlace Yield 

stabilityYield

Water

Environment

Farm income

Working conditions

Nutrient balanceNutrient loss

Soil erosion

SOCIALSOCIALECOLOGICALECOLOGICAL

Water & air qualityBiodiversityEcosystem services

SOCIALSOCIALECOLOGICALECOLOGICAL

Source: IPNI

Productivity

• Yield – per unit area, per unit of time

• Efficiency of all resources involved in production

•Quantity and Quality

Profitability

•Difference between value and cost of production

•Net profit per unit area per unit of timep p p

Cropping System SustainabilityC opp g Syste Susta ab ty

• Influence of time on resources involved

•Use of non‐renewable resources

• “Outputs do not decrease when inputs are not increased” (Monteith, 1990)

Rothamsted Research, 2006

Environmental Healtho e ta ea t

• Biophysical– Material losses to water and air

– N, P, nitrate, ammonia, nitrous oxide

• Social– Demand for labor

– Working conditions

Re-emphasize the Scientific Principlesfor Fertilizer Management: o e t e a age e t

BMPs and improving nutrient use efficiency

Scientific Principles for Fertilizer BMPs –SSource

• Ensure a balanced supply of essential nutrients.Ensure a balanced supply of essential nutrients.

• Supply plant‐available forms.

• Suit soil physical and chemical properties• Suit soil physical and chemical properties.

• Recognize:synergisms among nutrient elements and sources;– synergisms among nutrient elements and sources;

– blend compatibility;

– associated nutritive or non‐nutritive elementsassociated nutritive or non‐nutritive elements. 

Scientific Principles for Fertilizer BMPs –R tRate

•Assess:Assess:– Soil nutrient supply;

– All available nutrient sources;;

– Plant demand.

• Predict fertilizer use efficiency.y

Scientific Principles for Fertilizer BMPs –Ti iTiming

•Match timing of crop uptake.Match timing of crop uptake.

• Assess dynamics of soil nutrient supply.

• Recognize timing of weather factors influencing• Recognize timing of weather factors influencing nutrient loss. 

• Evaluate logistics of field operations• Evaluate logistics of field operations. 

Scientific Principles for Fertilizer BMPs –Pl tPlacement

• Recognize root‐soil dynamics.Recognize root soil dynamics.

•Manage spatial variability.

• Avoid detrimental effects on plant roots leaves and•Avoid detrimental effects on plant roots, leaves and seedlings. 

• Limit potential off‐field transport of nutrients• Limit potential off‐field transport of nutrients. 

ECONOMICECONOMIC

Global Framework For FertilizerBMPs

Net profit

Resource use Energy Ad ti

Return on investmentQuality

ProfitabilityResource use Energyefficiencies:   Labor

NutrientWater 

Adoption

Soil productivity

Profitability

RateRate

Yield stability

Nutrient 

YieldProductivity

Cropping SystemSustainability

SourceSource

TimeTimePlacePlace

Farm incomeWorking conditions

balance

Nutrient loss

Soil erosionBiophysical & Social

Environment

SOCIALSOCIAL

Water & air quality

ECOLOGICALECOLOGICAL

Biodiversity

Ecosystem services

SOCIALSOCIALECOLOGICALECOLOGICAL

Thank YouThank You

www.ipni.net

Scientific Principles for Fertilizer Managementg

• Right Product

• Right Rate

• Right Timeg

• Right Place

Genetic improvement in corn yieldsGenetic improvement in corn yields

Source: Cassman, K.G. and A.J. Liska. 2007. Food and fuel for all: realistic or foolish? http://www3.interscience.wiley.com/cgi-bin/fulltext/114283521/PDFSTART

Current rates of gain in crops yields are inadequate to meet expected demands …q p

Breaking the 112 kg/ha/yr barrier will require our best agronomicBreaking the 112 kg/ha/yr barrier will require our best agronomic science plus our grower’s best agronomic management