Like many parts of the world, the ongoing crop in Eastern Europe has faced a fertilizer crisis – and things could get worse.
Hat, according to Hungarian producer Nitrogenmuvec Zert, which sees grain yields fall by 15pc to 20pc this year in a region that includes major European exporters Romania and Poland.
High prices and supply issues have led farmers to cut nutrient use, at a time when droughts have also threatened crops. A rally in natural gas as fertilizers have become more expensive — a vital feedstock — increased costs and cut production.
Sanctions on Belarusian potash and moves to curb shipments to China have added to the crisis. This in turn is threatening global crop supplies that have been ravaged by the war in the breadbasket nation of Ukraine.
There cannot be much relief any time soon. Concerns remain about a prolonged gas shortage in Europe, which would be bad news for nutrient production.
“Winter is approaching its peak, with everyone in the industry assuming there will be no gas supply,” said Zoltan Big, chief strategy officer at NitrogenMuvec.
He said crop yields across Europe could fall further as the current season would be the first full season affected by the war.
Another problem is that nitrate-based fertilizers, the type preferred in Europe, cannot be produced with urea-based fertilizers elsewhere, he said.
Hungary’s government said last week that the country’s wheat crop could fall below four million tonnes, about a third below the five-year average.
If European farmers continue to scramble over fertilisers, it will threaten crops sown in autumn for collection in 2023.
Industry group Fertilizers Europe said earlier this month that high gas prices posed a “serious” threat to the European fertilizer industry. NitrogenMuvec itself can use up its cash buffer in the next one and a half months.
“We will not have reserves for a potential downside scenario such as a further increase in gas prices or possible unplanned maintenance,” Big said.
Despite the recent rise in gas prices, NitrogenMuvec is currently operating at full capacity of about 4,000 tonnes per day, as it tries to make up for the shortfall caused by the shutdown earlier this year.
Even if the situation remains the same, the production is expected to decline by 10 percent this year.
The big question is, what will be the impact on gas costs and supplies?
Fertilizer production later in the year. “With gas prices as they have been in recent weeks, it wouldn’t even be worth producing,” Bige said. (bloomberg)