Industrial production of synthetic fertilizer is critical to agricultural output around the world, but a series of shocks have led to an unprecedented increase in fertilizer prices.
- Hurricane Ida disrupted chemical production on the U.S. Gulf Coast in September 2021.
- China began export inspections on fertilizer inputs in October 2021 and quotas on fertilizer exports in 2022, to protect domestic supply.
- Fertilizer shipments were affected by the same pandemic-related delays and shortages that have affected global trade generally.
- As pandemic-related shocks seemed to ease, the conflict in Ukraine led to a spike in natural gas prices in early 2022, which increased shortages of key fertilizer inputs.* Nitrogen fertilizer PPI reached an all-time high in April 2022.
European fertilizer production is still severely restricted, but the past few months have brought some slight relief for U.S. producers. Domestic natural gas prices have moderated somewhat, and a strong dollar has made imports cheaper, helping bring the nitrogen PPI down slightly from its all-time highs. Still, fertilizer prices remain extremely high by historical norms. To learn more about the topic, check out this recent Regional Economist article.
*Nitrogen-based fertilizer, the most common type of industrial fertilizer, is made by mixing natural gas and nitrogen to make ammonia in what’s known as the Haber process.
How this graph was created: Search FRED for “fertilizer PPI” and click on the series you want. Click on “Edit Graph,” open the “Add Line” tab, and search for “fertilizer import price.” Then, for both lines, set the units to 100 for 2022-02-01 and the graph to start on 2009-01-01.
Suggested by Nathan Jefferson.