Fertiliser prices to hit record peaks owing to external market forces

: 20 December 2021; Hits: 5154

Fertiliser prices to hit record peaks owing to external market forces

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By George Munene
Fertiliser prices in Kenya have risen from risen from Sh2,700 early last year to Sh5,000-5,500 for 50kg bag. This is only expected to rise with prices predicted to hit Sh6,000 ahead of the mid-March long rains. This is in line with soaring prices of fertilisers globally which according to the October 2021 edition of the World Bank’s Commodity Markets Outlook have reached levels unseen since the 2008-09 global financial crisis.
According to ministry of agriculture officials, a confluence of international market forces; energy costs, supply curtailments, and trade policies; are contributing to the price hikes in a nation that depends almost exclusively on fertiliser imports from China, Russia and the United States.

China, which accounts for one third of DAP and a tenth of Urea fertiliser global trade, has suspended fertilizer exports until June next year due to high coal costs and inflexible electricity prices which have necessitated electricity rationing since September. These have forced local governments to implement rolling blackouts for energy-intensive industries affecting fertilizer production.
Natural gas prices have also risen globally, and production has further been affected by hurricane Ida which hit the Gulf Coast of USA between 26th August and 4th Sept this year. This constitutes a key ingredient in Ammonia production, which is used in nitrogen fertilizers.
Additionally, Russia , a key exporter of fertiliser to Kenya has imposed a six-month export quota on nitrogen fertilizers starting from 1st December 2021. This is aimed at shoring up domestic supplies and contain price inflation. The move has further supported a surge in fertilizer prices worldwide and tightened strained global fertilizer markets already searching for supply.
Additional to these emergent factors, the FOB price (the shipping cost borne by the buyer) accounts for about 70 per cent of fertilizer costs. A heavy burden for a country that is estimated to have imported US$259.17 Million worth of fertiliser in 2020, by the United Nations COMTRADE database.

According to the October 2021 World Bank Commodity Markets Outlook, DAP prices are projected to remain elevated in the first half of 2022 on expectations of tight supply unless Chinese export restrictions are relaxed earlier than anticipated. Urea prices are anticipated to decline marginally in 2022 as feedstock costs moderate.

This rising cost in fertiliser will not only affect farmers but consumers as well exerting inflationary pressures on food prices.