Grainswest - Fall 2022

Fall 2022 grainswest.com 39 European energy crisis: As it becomes drastically more expensive to produce fertilizer across Europe, ominous signs continue to pop up. Many plants have shut down or scaled back production, including fertilizer giant Yara, which reduced its ammonia capacity to just 35 per cent. As winter approaches, many analysts predict natural gas rationing will occur. Russia invades Ukraine: The human toll aside, this conflict has created tremendous waves in many sectors globally. The fact Russia and Belarus produce major quantities of most fertilizer-related inputs has altered markets completely. Companies plan to step up and fill the gap left by those two countries, possibly for good. Whether the shift to different producers is temporary or permanent, it will be a long and likely expensive process. Fertilizer tariffs: To date, Canada is the only nation to sanction Russian and Belarussian imports. In 2022, eastern Canadian farmers had already bought and paid for their fertilizer. However, once Canada slapped on a 35 per cent import tariff on those nations, it was a fight over who would pay up. Not surprisingly, the tab ended up in the hands of farmers. This primarily affected eastern Canadian farmers who may look elsewhere if they face a similar situation in 2023. The China factor: The Chinese government abruptly halted all exports of phosphorus last fall. The country that produces one-third of the global supply pledged to lift restrictions by June 30, 2022. The date came and went, then China implemented a quota system through the end of 2022, but will see a drastic reduction in exports. Its typical customers were forced to consider other options in an already tight marketplace. Fertilizer emissions reductions: In December 2020, the Canadian government announced a blanket reduc- tion of 30 per cent on all agricultural fertilizer emissions by 2030. No concrete plans now exist for how this will be achieved by either government, industry or farm groups. It also remains to be seen what penalties, if any, will be imposed should this goal collectively fail to be reached, but speculation has arisen that insurance premiums could become linked to a farm’s emission levels. A destructive 2020 storm in the U.S. Midwest was the first in a very expensive series of dominoes that drove up crop and fertilizer prices.