INDUSTRY INSIGHT

The role of fertilizers in maintaining food security during a pandemic

Fertilizers play an important role in maintaining global food security, but the COVID-19 pandemic has significantly disrupted the supply and demand of essential food supplies in recent months. What has the impact been on the fertilizers industry and what role has the industry played to ensure agricultural output and maintaining food security?

The COVID-19 pandemic is a significant health and human crisis which has had a direct impact on food security and the nutrition of millions of people on the planet. Even prior to the outbreak, millions of people were already suffering from hunger and malnutrition. According to estimates by the World Food Organization, there were about 820 million people with no regular access to healthy food, representing 10.8% of the total world population. This figure is unacceptably high. With border closures, quarantines, and supply disruptions during COVID-19, more people became restricted to access sufficient and nutritious sources of food, especially in countries hit heard by the pandemic or in countries with already high levels of food insecurity.

According to the Food and Agriculture Organization (FAO) of the United Nations, the number of people joining the ranks of hungry post the pandemic may range from 14.4 million to 38.2, or even 80.3 million depending on the GDP contraction. With a 2% economic slowdown in net food importing countries (including the GCC region), there are expected to be 14.4 million more people in food insecurity by the end of the coronavirus outbreak. This figure increases to 38.2 million in countries with a possible 5% economic slowdown and 80.3 million if the economy shrinks by 10%. As a result, in the worst-case scenario, the world will have nearly 900 million people affected by food insecurity.

“With a 2% economic slowdown in net food importing countries (including the GCC region), there are expected to be 14.4 million more people in food insecurity by the end of the coronavirus outbreak.”

“The fertilizer industry works closely with governments across the world to ensure that the current health crisis does not become tomorrow’s food crisis.”

While the world hasn’t faced any food shortages yet, all industry associations are urging countries to keep trade flowing, especially the trade of food supplies, and increase agricultural output during the current health crisis. In order to grow their agricultural output, farmers depend on the supply of vital inputs such as fertilizers, seeds and labor force, especially for the next season’s crops. If farmers experience hunger, they will prioritize buying food today over planting seeds for tomorrow, which will lead to food shortages in the next season. This will also impact farmers’ income and their ability to invest in inputs such as seeds and fertilizers.

The fertilizer industry works closely with governments across the world to ensure that the current health crisis does not become tomorrow’s food crisis. One of the key elements of these efforts is maintaining fertilizer production and ensuring no supply chain disruptions across transportation, warehousing, packaging, distribution, and retail services. These efforts are most important during the growing season in spring when fertilizers are primarily applied on the fields.

Some examples of efforts by fertilizer producers to ensure continuous supply of essential nutrients are included below:

  • In Europe, the transportation of fertilizers continued even during lockdown as soon as strict measures to protect truck drivers were put in place.
  • In Latin America, demand for fertilizers is healthy and supply continues during the most important plant growing phase. Large markets, such as Brazil and Argentina, do not report shortages in fertilizers.
  • In the GCC, fertilizer producers continued to produce essential fertilizers and supply their global customers without significant supply chain disruptions.
  • In Africa, fertilizer producers have initiated partnerships with farmers, farmer connectivity and digital solutions to supply fertilizers. With the support of agronomic solutions, maize production is expected to triple and feed more people across the African continent.

Globally, production of agricultural chemicals including fertilizers and crop protection chemicals has declined by 5% between January and May 2020. Capacity utilization has reduced by 6.5% – from 81.5% in January to 75.1% in May 2020. The fertilizer sector has performed better during the global pandemic, compared to the petrochemical and energy sectors in terms of production. Fertilizer makers have benefited from cheap feedstock and energy costs, meaning that even marginal producers have continued to operate, and the markets have not felt any shortness of availability.

“Currency fluctuations, political unrest, and unemployment in both developed and developing nations will inevitably have an impact in the months and years ahead.”

Nitrogen urea prices declined by 2.7% in Q1 2020, following a sharp decline in Q4 2019. This decline was driven by weak demand in China and limited fertilizers application due to the COVID-19 pandemic. Additionally, lower input costs such as natural gas have driven prices down. The supply of urea was almost unimpacted by lockdowns in China and other parts of the world. The World Bank projects that nitrogen urea prices will fall further by 10.3% in 2020 due to oversupply and lower input costs.

In contrast to nitrogen urea, DAP prices gained 7.5% in Q1 2020, reflecting the sharp production contraction in China, the world’s largest phosphate producer. Lockdown in China in various provinces with significant DAP production has caused severe supply chain disruptions. These production gaps were filled by DAP producers in Morocco and Saudi Arabia. The World Bank projects that DAP prices will soften during the rest of 2020 and average 7% lower from their current levels.

While there was no serious supply disruption across the fertilizer industry, the outlook remains uncertain. Fertilizer supply to cooperatives, wholesalers and farmers continues as usual but what broken economies will mean to the demand for fertilizers is yet to be seen. Currency fluctuations, political unrest, and unemployment in both developed and developing nations will inevitably have an impact in the months and years ahead.

What next for the fertilizer industry?

 

Proactive measures from the fertilizer industry are paramount to ensuring a smooth recovery of the sector and positive performance. They apply in both sustaining their own operations as well as ensuring supply of fertilizers to cooperatives, wholesalers, and farmers. Without a sufficient quality of every essential plant nutrient, plant growth and yields as well as soil health and quality are significantly affected. In vulnerable regions where soils are already depleted reduced access to fertilizers risks to further damage the soils and worsen the already fragile economic situation of farmers.

 

To avoid disruptions in agricultural production and ensure food security around the world, GPCA urges the fertilizer industry and other relevant authorities in all countries to:

  1. Keep international trade open and protect the food supply chain by providing essential inputs, such as seeds and fertilizers, to ensure farmers have access to markets to sell their produce
  2. Focus on most vulnerable regions where lack of fertilizers will mean further damage to plants and soils
  3. Keep domestic supply chain functions alive and operational to ensure exports of fertilizers are smooth
  4. Take all necessary precautions for the safety and wellbeing of employees along the food chain
  5. Maintain international cooperation to ensure all countries and regions have sufficient supply of all agricultural inputs and outputs

“GPCA urges the fertilizer industry and other relevant authorities to keep international trade open and protect the food supply chain by providing essential inputs, such as seeds and fertilizers, to ensure farmers have access to markets to sell their produce.”

In summary, the COVID-19 pandemic has put food security and the nutrition of millions of people under threat. Many of the affected populations were already suffering from malnutrition. If no action is taken today from all participants in the food value chain, including the fertilizer industry, we may face severe disruptions in food security with serious consequences for the health and nutrition of millions of people across the globe. By sustaining all vital inputs to the agricultural system, we can not only avoid the worst impact of the pandemic yet, but also support the transition to sustainable food systems which enable healthy diets, and therefore, better health for all.

This article was written as a preview of an upcoming GPCA report entitled “Role of fertilizers in food security”. The full report will be published in October.

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