Fertiliser industry to make $57 billion in profits this year as farmers, govts grapple with the bill

The costs for imported fertilisers more than doubled from 2020 to 2022 and the world’s largest corporations in the industry are using their market power to capture mega profits, especially in the Global South. This is happening as farmers and governments are in the midst of an energy crisis, a new report has found. 

There has been a 189 per cent increase in costs for the key imported fertilisers in 2021, which is on course fo r a 288 per cent increase in 2022, a report by non-profit Genetic Resources Action International (GRAIN) and international think tank Institute of Agriculture and Trade Policy revealed. 

Read more: Morocco — a top fertiliser producer — could hold a key to the world’s food supply

Governments in the international forum Group of Twenty (G20) paid at least $21.8 billion (Rs 1,70,922 crore) extra for vital chemical fertiliser imports in 2021 and 2022, compared with 2020 prices, the analysis showed.

The corporations, on the other hand, are raking in profits — nine of the largest fertiliser companies are expected to make $57 billion in profit in 2022, up more than four-fold from two years ago, the report titled The Fertiliser Trap released November 8 found.

It calculated that the profits in 2021 and 2022 are on course to come to a total of $84 billion. This is 30 times the $1.9 billion due to be paid by the United States farmers for fertiliser imports in 2022, the report found. 

The 2022 profits are, in fact, on course to be twice the entire gross domestic product (GDP) of Senegal, which saw its costs for the imported fertilisers analysed by the report more than double from 2020 to 2022. 

The combined profits of nine of the world’s biggest fertiliser companies — Nutrien, Yara, Mosaic, ICL Group, CF Industries, PhosAgro, OCI, K+S and OCP — were just under $13 billion in 2020, according to company filings. 

The analysis sampled G20 members — India, Argentina, Australia, Brazil, Canada, China, EU (including France, Germany and Italy), Indonesia, Japan, South Korea, Mexico, South Africa, Turkey, the United Kingdom and the US. 

The high cost of natural gas, along with the disruption of exports from Russia and Ukraine due to the ongoing crisis, has caused prices for chemical fertiliser to double and, in some cases, even triple in the last two years. 

India spent 28.8 per cent more for the import of urea in September 2022 compared to September 2020, muriate of potash at 11.7 per cent higher prices, ammonia at 84.96 per cent more and Di-ammonium phosphate at 3.8 per cent higher costs, according to the department of fertilisers, under the Union Ministry of Chemicals and Fertilizers. 

Read more: How to replace chemical fertilisers with organic & bio-fertilisers

Even corporate profits were fuelling fertiliser prices, the researchers highlighted.

The report said: 

The $200 billion global fertiliser market is controlled by a handful of companies — just four of these companies control 33 per cent of all nitrogen fertiliser production. 

For example, the National Farmers’ Union in the UK has expressed concern about CF Fertilisers’ monopoly over the country’s fertiliser market. Meanwhile, Mosaic is estimated to control over 90 per cent of the domestic phosphate fertiliser market in the US, the report added.

The developing countries sampled (Ghana, Ethiopia, Pakistan, Senegal, Kenya, Bangladesh, Zambia, Tanzania and Nigeria) by the report together spent 186 per cent more in 2021 and 295 per cent more in 2022 for the same sample of fertilisers (a total extra bill of $2.9 billion).

The report did not analyse domestic costs and production because of a lack of data. This means that the findings only tell part of the story — the total extra global cost to governments and farmers is even higher than the numbers depicted.    

Fertiliser prices are also fuelling food prices by increasing the cost of production or reducing yields as farmers cut the amount of fertiliser they apply or the area of land under production.

The United Nations, in early October 2022, warned that if immediate action is not taken to bring fertiliser prices down, there could be a global shortage of food. 

The rising prices are straining government reserves and budgets, making it difficult for governments even to maintain their existing fertiliser subsidies, the report pointed out. 

“Ghana, for example, had to scale back its fertiliser subsidy scheme, reducing the total amount of fertiliser covered by the scheme from 450,000 tonnes to just 150,000 tonnes,” it said. Even the Indian fertiliser subsidy budget — currently around $26 billion — was now predicted to fall far short of what is needed, it added. 

Read more: Organic fertiliser: A must for the next green revolution

While the crisis is stark, the response so far from many governments was to look for ways to increase chemical fertiliser production, in turn deepening the fertiliser companies’ profits.

Increased global fertiliser production is expected to be a major part of the agenda when the G20 nations meet in Bali, Indonesia, in November 2022. 

But the report recommends that it would be simpler and more cost-effective for governments to focus on reducing consumption in the long term, including programmes to support farmers to transition towards environmentally sound and more cost-effective alternatives.  

“Increased production of chemical fertilisers will not resolve this crisis. The era of cheap fertilisers is over, and the costs have become too much to bear — both in terms of the financial burden for farmers and public budgets, the severe environmental and health impacts, and the long-term risks to food security,” the analysis concluded. 

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