The Global Dynamics of Fertilizer

Food security – having enough food to feed a growing population remains one of the great challenges facing humanity. The 2008 Millennium Project State of the Future report issued by the United Nations says food production must increase by 50 percent by 2013 and double in 30 years if we are to make significant progress in feeding more of the world’s undernourished people.

Because 40 to 60 percent of the world’s food production is made possible through the effective use of fertilizer, this natural resource and the industry that provides it is at the center of the global solution.

Fertilizer is a global industry with production and distribution systems that come with significant logistical challenges.

When you consider that every field of crops in the world is made up of individual growing plants, each in need of nutrients, the fertilizer industry has a distribution and economic challenge unrivaled in almost any other business.

Helping farmers feed all those hungry crops around the world – so they, in turn, can feed us – involves much of something called “distribution logistics,” or, getting what you need from its place of origin to its place of use. With crop nutrients, this is about getting those 17 different elements critical to plant health from different sources around the world, blending them to a prescription designed for a specific crop in a specific field and applying it when the weather conditions and crop season are right. This subjects fertilizer production and use to many global economic factors.

Commodity prices (prices for corn, wheat, soybeans and other crops) will affect demand for different nutrients, since farmers will make planting decisions based on their desire for a profitable crop and different crops require different nutrients.

Transportation costs will affect fertilizer costs because fertilizer is a bulky and heavy product that must often be shipped great distances by a variety of carriers, including ocean-going ships, railroads, trucks and river barges. Petroleum prices directly impact the price of plant food because ships, trains and trucks run on petroleum, higher oil prices raise transportation costs.

Natural gas is used two ways in the production of nitrogen as well as to dry prilled products such as potash and phosphate. During nitrogen production, it is combined with atmospheric nitrogen to create ammonia. Second, it also is used to generate the heat (1,600 degrees F or so) needed for the conversion process. The price and availability of natural gas affect the supply of nitrogen that plants needs to grow healthy through their impact on production costs and decisions.

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