The current crisis in the Ukraine is set to create a devastating domino effect on the world’s global food chain. As supplies of food, fertilizers and other commodities continue to be cut off from Ukraine, prices are skyrocketing, causing many to go without. As one of the world’s largest food suppliers, it is estimated that Ukraine produces:
Notably, the war in Ukraine has not only shook world grain productions but has also affected global access to fertilizers, causing further strain to an already tightened supply. Indeed, farmers are seeing such an increase in the cost of fertilizer that some have chosen to use fewer nutrients in their production or rotate crops, which is likely to reduce crop yields causing further cost increases.
Why Is The War In Ukraine Causing Fertilizer Shortages?
Most agricultural fertilizers contain three targeted ingredients for plant nutrition. They are nitrogen, phosphorus and potassium (also referred to as potash). However, Russia and its allies - namely Belarus, provide an estimated:
This is problematic for farmers across the world. Sanctions placed by Ukraine’s western allies have caused these exports to dwindle and prices to soar. In the US, fertilizer prices are 78% higher than in 2021. For many farmers, they simply can’t afford this hike in price.
Price Comparison
A ton of phosphorus and potassium fertilizer in 2021 cost around $450
A ton of phosphorus and potassium fertilizer in 2022 will cost $1200
A ton of nitrogen fertilizer in 2021 cost around $500
A ton of nitrogen fertilizer in 2022 will cost $1000+
Across the west, farmers have scrambled to find cheaper alternatives. Consequently, demand for manure has catapulted, with many farmers unable to get their hands on a nearby supply. As a result, several farmers have switched seeds in an effort to secure their yields. With soybeans requiring fewer nutrients and, thus, less fertilizer, soybean seeds have seen a 4% uptake in the US than the previous year. Meanwhile, corn acres fell to a 5 year low, putting further strain on an already tightened food supply.
Reducing Reliance on Exports:
The threat to the global food supply has not gone unnoticed. Nearly all major nations have implemented new strategies targeted at finding a fertilizer solution closer to home. Our consultants at CSG Talent have identified a particular solution which is seeing a surge in demand - potash mining.
Indeed, recent figures have indicated that in the next 30 years, demand for potash will be higher than copper, iron and oil.
So, What is Potash Mining?
Potash mining retrieves potassium supplies from the earth, commonly needed for agricultural fertilizers. The process involves inserting pressurized streams of hot salt water, or brine, underground to dissolve the salt beds. This liquid is then pumped back to the surface, where it is dried at a very high temperature to extract the crystallized potash.
Top 5 Potash-producing Countries:
1. Canada - 14 million MT
2. Russia - 9 million MT
3. Belarus - 8 million MT
4. China - 6 million MT
5. Germany - 2.3 million MT
For now, the US still relies heavily on potash imports. With Belarus and Russia producing 40% of the world’s potash, the war in Ukraine has impacted supplies significantly. Indeed, Russia’s fertilizer exports are so pivotal to the world food supply that the Biden administration purposely developed a loophole for them in his March sanctions. That said, financial sanctions still create many hurdles to fertilizer supply chains.
Why Doesn’t The US Utilize Canadian Dominance In Potash Mining?
In recent years, the US has turned to Canadian imports of potash. However, they too are not without obstacles. In March this year, union strikes shut down corn belt connections for two days, adding more pressure on US officials to look for supply chain alternatives closer to home.
Most recently, the US Department of Agriculture announced they would invest $250 million to support all-American fertilizer companies to reduce reliance on exports.
In December last year, Michigan Potash received the final go-ahead for the country's largest Potash mine, valued at $65 billion. Currently, the US produces 480,000 MT of potash, but the Michigan mine could increase this number considerably.
Meanwhile, other nations are swiftly looking for domestic alternatives too. Anglo-American firm PLC recently acquired a UK mine for $4 billion. Meanwhile, Australian Potash Limited began drilling at Lake Wells Sulphate of Potash Project (LSOP) in 2021 and is in the early stages of developing its hydrological flow model.
Similarly, it is believed that Spain may be sitting on a goldmine of potash reserves, estimated to be around 68 million MT. While there are few potash projects currently active in Spain, this number will likely increase in the coming years.
Environmental Impact of Potash Mining
With an environmental footprint that is considerably more attractive than other major chemical fertilizers, many hail potash mining as the ‘in-time’ solution for the fertilizer crisis. Indeed, potash mining seemingly offers a long-term future profit driver in the wake of the transition away from fossil fuels. But there is a catch.
Whilst having an arguably less environmental impact than other mining endeavours, it does not mean that potash mining is not entirely problematic to the surrounding environment. For example, many Michigan residents are fearful of the new potash mine project as they believe it will impact the natural landscape with devastating effects.
In order to collect potash deposits, a considerable amount of water is needed. The Michigan Department of Environment, Great Lakes, and Energy (EGLE) have permitted Michigan Potash to extract 725 million gallons of groundwater yearly. That’s roughly 2 million gallons a day.
