Recently, the International Fertilizer Association (IFA) has released a report on the world fertilizer market and forecast the medium-term outlook to 2026, updated with the latest impacts from the Russian war- Ukrainian.
Current situation of global fertilizer consumption
According to IFA estimates, global fertilizer consumption in the financial year 2021/2022 will decrease by 1.6% to 200.6 million tons (in terms of nutrients), after having increased by 6% in 2020/2021 (reaching the 203.8 million tons). The reasons for this decline are reduced fertilizer supply (along with changes in crop composition), war in Ukraine and a pre-purchased amount of fertilizer in 2020/2021.
Among fertilizers, global potash consumption in fiscal year 2021/2022 fell 4% after increasing 11% in the previous year, phosphate fertilizer consumption fell 2.5% after increasing 5.5% in the previous year. . Consumption of nitrogenous fertilizers was fairly stable, down only 0.2% after a 4% increase in the previous year.
South Asia (especially India), Europe and North America are the leading regions in terms of reduction in fertilizer consumption. Fertilizer consumption in East and West Asia regions also decreased. Fertilizer consumption in Africa in fiscal year 2021/2022 remained stable thanks to strong demand in Nigeria. Meanwhile, fertilizer consumption in Latin America, the EECA region and Oceania has increased.
Factors affecting fertilizer consumption in the future
If the global supply is assumed to be stable in the next 2 years, we need to consider the factors that will greatly affect fertilizer demand as follows:
Government support
Farmers in regions such as North America, South America, Europe and Oceania can often get credit loans to buy fertilizer. It is often more difficult to obtain such loans in Africa and Asia, but governments in some of these regions provide direct financial support to smallholder farmers to buy fertilizer. The level of government support varies by country, crop type, fertilizer type and timing. In particular, crops serving food security are often prioritized, and nitrogen fertilizers are also preferred over other fertilizers because they contribute mainly to increasing harvest yield. Overall, government support can have a big impact on the respective country’s fertilizer consumption.
Rising fertilizer prices in 2021 and the first half of 2022 prompted some changes in government support policies. In Turkey, the government has increased the payment of fertilizer subsidies to grain farmers. In India, the subsidy for purchasing DAP has increased during the autumn crop. In Pakistan, in May 2022, the government decided to subsidize the purchase of fertilizers directly. In Russia, retail fertilizer has been imposed a ceiling price from July 2021. In China, the government has decided to implement fertilizer export controls to limit the increase in domestic fertilizer prices.
In many countries, increased government support has not been enough to protect farmers from recent spikes in fertilizer prices. But India is a notable exception, the ceiling on the retail price of urea has been held steady for many years and in the second quarter of 2022 was 10 times lower than international prices.
Import of fertilizers
Due to the concentrated nature of the ore resources and the production of potash fertilizers, many countries around the world are completely dependent on imports of this fertilizer from a few other countries.
Import demand for phosphate fertilizers is more diverse and varies by region. The countries of North America and North Africa produce nearly enough phosphate to meet domestic demand, while Latin America, East Asia (excluding China) and Oceania have to import more phosphate fertilizers.
Nitrogen fertilizers are widely produced, many countries produce enough to meet at least part of their domestic demand, so only a few countries and regions have to depend on imports. In particular, Latin America is the region most dependent on nitrogen fertilizer imports.
Global planted area
According to the June 2022 assessment, the world planted area of maize and wheat in the crop year 2022/2023 is forecast to decrease due to factors such as the war in Ukraine, adverse weather and rising input prices. high. Meanwhile, the global rice area is forecast to increase slightly, while the soybean area will increase significantly. But these projections are subject to year-end realities, as most of the soybean and corn acreage in Latin America will only be planted in the second half of 2022.
Forecast of global fertilizer consumption 2022/2023
IFA presents three scenarios for the prospect of global fertilizer consumption in the financial year 2022/2023: Optimistic scenario, Medium scenario and pessimistic scenario.
In general, according to IFA, global nitrogen fertilizer consumption in the financial year 2022/2023 will decrease by 0-5%, phosphate fertilizer consumption by 0-7%, and potassium fertilizer consumption by 1-13%. In IFA’s pessimistic scenario, global inorganic fertilizer consumption in fiscal year 2022/2023 is forecast to decline by 7%, which is the largest decline since fiscal 2008/2009, when fertilizer consumption global decline by 8%.
South and East Asia are the regions projected to be the main drivers of the decline in global fertilizer consumption in the coming financial year, but proportionally, Africa is the region with the largest decline. in which sub-Saharan Africa is most affected with a decrease of 18-23%.
Due to supply problems, potash consumption is forecast to see the biggest decline among fertilizers. The four regions with the largest reduction in potash consumption in the fiscal year 2022/2023 are South Asia, Africa, Oceania and West Asia. The decline could be as high as 30% and 40% in South Asia and Africa. In the coming year, potash consumption in these four regions is forecast to only partially recover.
Medium-term outlook
In the medium term (2024-2026), IFA forecasts that global fertilizer demand will continue to recover under 3 scenarios as follows:
– The pessimistic scenario: Global fertilizer consumption will reach 194.6 million tons (in terms of nutrients) in the financial year 2026/2027, 2 million tons higher than in 2019/2020, but 9 million lower. tons compared to 2020/2021.
– Medium scenario: Global fertilizer consumption will reach 202.1 million tons, 9.5 million tons higher than fiscal year 2019/2020, but 1.7 million tons lower than 2020/2021.
– Optimistic scenario: Global fertilizer consumption will reach 211.1 million tons, 7.4 million tons higher than in 2020/2021.
The downward trend in potash consumption is expected to slow the recovery of total fertilizer consumption globally. Under the pessimistic scenario, global potash consumption will only reach 36.6 million tons in the financial year 2026/2027, slightly higher than 10 years ago (36.2 million tons in 2016/2017). and well below the record 41.3 million tonnes in 2020/2021.
Under the medium scenario, global potash consumption in the financial year 2026/2027 will reach 38.3 million tons, higher than 2019/2020 (37.2 million tons), but still much lower than the record level of the country. year 2020/2021. Only in the optimistic scenario will global potash consumption exceed 2020/2021 levels by the end of the cycle.
According to the pessimistic scenario, the consumption of nitrogen and phosphate fertilizers in the fiscal year 2026/2027 is also lower than in 2020/2021. However, in the medium and optimistic scenarios, global nitrogen and phosphate fertilizer consumption will grow rapidly and by 2026/2027 will surpass the record set for 2020/2021.
Under the pessimistic scenario, East Asia and South Asia regions are forecast to lead the global consumption decline in 2021-2026. Under the medium and optimistic scenario, Latin America will drive the growth of global fertilizer consumption over the next five-year cycle.