fertilizer cost: Rising fertilizer costs are catching up to rice farmers, threatening supplies

Rising fertilizer costs have led rice farmers across Asia to reduce their use, a move that threatens the crop of a staple that feeds half of humanity and could lead to a loss if prices are not curbed. There could be a complete food crisis.

From India to Vietnam and the Philippines, prices for a key crop nutrient to boost food production have doubled or tripled in the past year. Less fertilizer use can mean a smaller crop. The International Rice Research Institute predicts that next season yields could drop by 10%, leading to the loss of 36 million tons of rice, or the equivalent of feeding 500 million people.

This is a “very conservative estimate”, said Hamnath Bhandari, a senior agricultural economist at the institute, adding that the impact could be far more severe if the war in Ukraine continues.

Fertilizer prices have been rising globally due to supply shortages, production crises and, most recently, war, which has disrupted trade with Russia, a major supplier of every major type of crop nutrient. The rise in fertilizer costs threatens to escalate food inflation, assuming farmers are continuing to cut back and affecting crop yields. If that happens, global supply chains are likely to suffer a major setback: practically every plate of food gets delivered to the dining table with the help of fertilizers.

Rice farmers are particularly vulnerable. Unlike wheat and corn, which have seen prices skyrocket as war threatens one of the world’s major breadbaskets, rice prices have plummeted due to substantial production and existing reserves. This means rice growers are facing increased costs while not getting more money for their grains.

Nguyen Binh Fong, owner of a fertilizer and pesticide store in Vietnam’s Qian Jiang province, said the price of a 50-kilogram sack of urea – a form of nitrogen fertilizer – has tripled in the past year. He said some farmers have reduced fertilizer use by 10% to 20% due to rising prices, which has reduced production.

“When farmers cut down on fertilizer use, they accept that they will get less profit,” he said.

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Fertilizer prices have been rising globally due to supply shortages, production crises and, most recently, war, which has disrupted trade with Russia, a major supplier of every major type of crop nutrient.

Governments in Asia, where most of the world’s rice is harvested, are keen to avoid this scenario. Given the importance of rice to millions of people, especially those in the lower income group, it is important for politicians to keep prices under check. Many countries provide fertilizer subsidies to increase the yield of improved varieties of cereal crops.

The fertilizer rally is adding to their fiscal burden. India, which relies heavily on fertilizer imports, is set to spend about $20 billion to protect farmers from high prices, up from a budget of about $14 billion in February. The South Asian nation is the world’s second largest producer of rice and exports to countries such as Saudi Arabia, Iran, Nepal and Bangladesh.

Somashekar Rao, a 57-year-old rice farmer who grows rice on a 25-acre plot in Telangana in southern India, said he is grappling with the increased cost of fertiliser. He expects a delay in securing adequate supplies to drop yields for his winter-sown crop by 5-10%. Fertilizer is most effective when used on plants in their peak growth cycle.

Crunch isn’t all bad. There is a lot of use of chemical fertilizers in the area. The increase in prices is encouraging farmers to use resources more efficiently, according to the International Rice Research Institute, which is working with growers to achieve optimum results. The solution involves using a combination of chemical and biological inputs to maintain yields while improving soil health.

Still, implementing these steps will take time. And as the war in Ukraine continues to disrupt economies around the world, farmers and the Rice Institute say perhaps the toughest days are yet to come.

“If this continues, it is inevitable” that the prices will go up, Bhandari said. “It has to reflect somewhere.”

(A one-stop destination for MSMEs, ET Rise provides news, views and analysis about GST, exports, funding, policy and small business management.)

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