$40bn fertiliser industry investment since food crisis

40bn_fertiliser_industryThe international Industry Association (IFA) has released to the public its short-term Fertiliser Outlook 2010-2011 - Image credit to - Image credit to 234next.com

The international Industry Association (IFA) has released to the public its short-term Fertiliser Outlook 2010-2011

The report warns of rising agricultural commodity and food prices, as seen just before the food crisis of 2007/08. It also describes the global fertiliser industry's response to the challenge of increasing agricultural productivity worldwide. IFA estimates that the industry has invested some US$40bn in new capacity for the three main nutrients (nitrogen, phosphorus and potassium) in North Africa; West, South and East Asia; and North and South America.

The economic recovery in 2010 was experienced in agricultural markets, with a rebound of agricultural commodity utilisation and prices. A number of factors have contributed to an upward evolution of crop prices. The first is the heat wave that caused poor cereal harvests in the Commonwealth of Independent states (CIS), including extensive fire damage in Russia, as well as the hot and wet conditions in the Corn Belt of the United States. Second, the grain export restrictions currently in effect in Russia and Ukraine are likely to be maintained until June 2011. Third, demand for ethanol, particularly in the United States, remains high, putting pressure on grain markets. Fourth, the cereal stock-to-use ratio is declining to worrying levels, with a significant drop in maize and wheat inventories.

“Another food crisis could be looming,” says Patrick Heffer, Director of IFA’s Agriculture Service. “The combination of the weather, trade restrictions, bioenergy growth and low stocks takes us back to three years ago, when food prices spiralled. Based on the data we have analysed, we are witnessing a situation very similar to what happened in the second half of 2007, with all agricultural prices going up. Today even cotton and sugar prices are high.”

Speedy recovery

Following a massive decline in fertiliser sales and consumption last year, the speed and extent of the recovery in the first half of 2010 surprised most analysts leading to an annual increase of 13 per cent and 7 per cent over 2009, respectively. IFA is projecting growth in global fertiliser consumption of 4.7 per cent for 2010/2011 and 3.8 per cent for 2011/12. By 2011/12, nutrient application rates would then have fully recovered to the levels seen prior to the economic crisis of 2008.

On the supply side, the rebound in global demand and the near-empty distribution channels at the beginning of the year triggered a strong sales increase and subsequent rising operating rates for all nutrients and raw materials. However, the fertiliser industry will be able to absorb the incremental demand for food, feed, fibre and energy production thanks to the significant investments it has made. The industry has learned the lessons of the previous food crisis and is undertaking extensive development projects in order to play its role as a key driver of sustainable agricultural intensification and improved food security.

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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