Nitrogen-based agricultural fertilizers are key for high crop yields. Between 2021 and 2024, a broad range of global supply shocks resulted in large swings in their price. Today, we go farther back in time to discuss how geopolitical conflict and technological innovation completely reshaped this industry during the first decades of the 20th century.

Our FRED graph above shows the wholesale dollar price of 100 pounds of sodium nitrate traded in New York between 1913 and 1939. This chemical compound is a key input in the industrial production of agricultural fertilizer and also munitions.

Sodium nitrate is also known as “Chilean saltpeter” because it’s present in mineral form in high-desert deposits in Chile and Peru. During the 19th and early 20th centuries, those mines were the largest sources of sodium nitrate.

High demand for munitions during World War I helps explain why the price of sodium nitrate more than doubled between 1914 and 1918. But, because the international trade in Chilean saltpeter was interrupted during the war, industrial alternatives were developed and widely adopted. This alternative supply of nitrates (synthesized from ammonia) quickly lowered the price. By 1933, this commodity traded at half its pre-WWI price, making the Chilean mines unprofitable.

For even more history…

Our FRASER economic archive includes a Fed bulletin from 1922 that describes conditions in Chile:

“The decreased production of nitrate has resulted in serious unemployment in Chile… At the request of some of the more important nitrate producing companies, a law designed to meet the recent difficulties of the nitrate situation was passed in September 1921. Under this law, companies engaging to keep open their plants may receive Government credits secured by nitrate stocks…”

How this graph was created: Search FRED for and select “Wholesale Price of Soda, Nitrate for New York.”

Suggested by Diego Mendez-Carbajo.