Reuters – Norway’s Yara, one of the world’s largest fertilizer makers, is slashing ammonia production due to soaring gas prices, raising questions about Europe’s ability to produce enough fertilizer for its crops.
Ammonia plays a key role in the manufacturing of fertilizer. Without it, crop yields will deteriorate because nutrients removed from soil during harvesting may not be fully replenished.
Yara has repeatedly warned that the world faces an extreme food supply shock due to a combination of high gas prices, the war in major grains producer Ukraine and sanctions on fertilizer producer Russia.
Read Also
Mazergroup’s Bob Mazer dies
Mazergroup’s Bob Mazer, who helped grow his family’s company into a string of farm equipment dealerships and the main dealer for New Holland machinery in Saskatchewan and Manitoba, died July 6 from cancer.
Fertilizer production requires large amounts of energy. Manufacturers including Yara use natural gas for the process, and gas prices surged almost 40 per cent in August and by nearly 300 per cent this year.
“That is going to lead to a bit lesser volume supplied on the soil. And basically, in short, the long-term implication is higher food prices,” said Berenberg analyst Adrien Tamagno.
Yara began reducing ammonia production earlier this year. It will only use approximately 35 per cent of its European ammonia capacity after the latest cuts, the company said Aug. 25.
“We’ve basically never seen prices high enough to defend production at these cost levels,” said Kepler Cheuvreux, analyst with Magnus Melvær Rasmussen. “It’s not looking good and that’s a problem for farmers, for food production and for food security.”
Farmers will still be able to import fertilizer from outside Europe but it will be more expensive, analysts say. Alternatively, European fertilizer could be produced using ammonia from elsewhere.
Yara said it will use imported ammonia, where feasible, to meet customer demand.
“It’s hard to see that you would be able to replace everything that’s potentially missing,” said Rasmussen.
Yara is one of several European chemical companies that have curtailed ammonia output. Germany’s SKW Piesteritz and BASF reduced production earlier this year. The trend has since accelerated.
Grupa Azoty, Poland’s biggest chemicals firm, said Aug. 23 that it will limit fertilizer production, citing an “extraordinary and unprecedented” rise in gas prices.
CF Fertilisers UK, a subsidiary of CF Industries, is temporarily halting ammonia production at its Billingham Complex due to high natural gas and carbon prices, it said Aug. 23.
