The ongoing Russia-Ukraine war is causing fertilizer prices to surge even higher than they have in recent months and exacerbating the food crisis in Africa. Fertilizer prices have been on the rise in the past year as the war dragged on and fertilizer exports from Ukraine became increasingly scarce, resulting in extremely high profits through the end of 2022 and into 2023.
Data shows that in some cases top fertilizer producers saw their profits triple from 2020 to 2022 based on soaring prices and sky-high demand from countries desperate for fertilizer imports. However, while these companies have earned millions more in profit during this period, African countries that rely on fertilizer imports to feed their populations have been forced to deal with fertilizer supply shortfalls.
The most recent harvesting season came to an end amid exorbitantly high fertilizer prices that pushed production costs up and limited production, in many cases resulting in food shortages and increased food prices. In many southern African countries, farmers closed the harvesting season with limited margins, thanks to increasing production costs.
Fertilizer prices within Africa have remained extremely high in recent months while prices in the international market have gone down, worsening the food crisis in Africa even further by reducing yields, raising food prices and increasing food insecurity in the region. Around 73 million people in South and Eastern Africa are currently going through acute food insecurity with people in middle and low-income countries suffering the most.
Despite being dependent on fertilizer imports, usage of imported fertilizers in the region has been relatively low.
The Food and Agriculture Organization of the United Nations estimates that maize yields in countries such as Zambia were less than half of yields seen in South Africa and one-third of Argentina’s due to increased import costs and limited application. East African nation Kenya saw a 30% drop in fertilizer imports in 2022 followed by a drop in maize production during the 2022–23 period.
With maize yields in the country dropping by 18% in 2022–23 compared to the prior five years, Kenya suffered a significant maize deficit that resulted in significantly higher prices. Poor rains in the previous months also impacted yields and increased food insecurity in the country.
If fertilizer prices remain at current levels for the near-term, food production in Africa will be constrained and the continent will likely be unable to produce enough food to meet domestic demand.
Major fertilizer producers such as Compass Minerals International Inc. (NYSE: CMP) have a role to play to ensure that they provide quality fertilizers where they are most needed and at competitive price points so that the food crisis being foreseen can be forestalled.
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