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Keys to the prices rising in the European fertilizer market

Yara unravels the different factors involved in the increase in prices brought about by the plant nutrition industry and how this affects food security.

3/28/2022

A moment in the fertilizer manufacturing process at the Yara facilities.

The prices of the main inputs are increasing and food security is at risk. For this reason, all the actors in the agri-food chain must focus on the impact it will have on crop nutrition, ensuring that farmers can maintain a balance in mineral fertilization and plan their fertilization optimally with our technical advice, in order to ensure the yield and quality of your harvest.

What is currently happening in the fertilizer industry worldwide is a domino effect, which began with the post-pandemic economic recovery and continues with the war between Russia and Ukraine. For this reason, Yara has considered it important to explain some of the variables that currently affect the price of inputs.

1. Cost of raw materials: Since the end of 2020, the prices of inputs have increased their cost very significantly. In this section, one of the most worrying has been the cost of urea, which has risen almost 300%.

2. Fuel prices: In March 2020 the price of diesel was 1.08/l, while 2 years later the price is 1.88/l. This increase, together with the tax pressure that this good has, has led to a carrier strike, which directly influences the supplies of the entire food chain. An aspect in which Yara works to continue supplying its farmers and that they have the necessary nutrients for their crops, since after the recent rains we are at a key moment for fertilization.

3. Energy crisis: The shortage of supply and the strong demand for natural gas in the world have also triggered its price, in March 2021 its price in Spain was 16.55/MWh while a year later it stood at 200.9/MWh. The record prices of natural gas in Europe have significantly increased the cost of ammonia production (the main input for the manufacture of nitrogenous fertilizers).

4. Maritime freight: About 90% of world trade is carried out by sea. The high demand, together with the lack of containers, the tension experienced in the supply chain and in other markets such as energy, have caused the freight price of a standard container to increase by 79% compared to the previous year.

5. Geopolitical uncertainty: Ukraine ranks alongside Russia among the five largest cereal producers in the world. In addition, Russia exports to the EU around 45% of the gas it consumes. The recent events in Ukraine and the impact of the measures adopted by both Russia and the EU are further accelerating the increase in energy prices and some raw materials.

The company highlights that it is not only the price of fertilizers that has increased in recent months, but also that all agricultural inputs have increased and explains that this will require an even more prudent application of efficient products by farmers, to which Yara contributes with nutritional solutions and agronomic knowledge to ensure the highest standards of efficiency.

However, the company warns that the stabilization of the price of fertilizers could take longer than expected; this will depend on the reduction in the cost of raw materials and their availability in international markets. However, from Yara they make it clear that "as always, we do everything possible to maintain our fertilizer production capacity at the highest possible level and guarantee the supply of inputs that farmers need to meet the global demand for food."


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