Although all the attention lately has been on food prices and the effect of their sharp rise for inflation, development and security, the rises seen on food have been as nothing compared to some of the increases seen on fertilisers over the same period.
A briefing by Andrew Dorward and Colin Poulton, published in June by the Future Agricultures consortium, gives chapter and verse. Between May 2006 and May 2008, here’s what prices did for selected key foods and fertilisers:
Cotton – up 29%
Beverages – up 41%
Wheat – up 61%
Maize – up 108%
Rice – up 185%
Urea (a key nitrogen fertiliser) – up 160%
DAP (a major phosphate fertiliser) – up 318%
The underlying causes cover both sides of the supply / demand line. On the demand side, there’s the basic fact that the need for fertilisers is soaring as a result of higher food prices and demand for crops as biofuels.
On the supply side, energy costs are a huge factor (especially in the case of nitrogen fertilisers); some fertiliser exporters (like China) have imposed export controls; and in the background, there are capacity limits to increasing production, especially for phosphates – a point that has the peak oil crowd already thinking hard about the concept of peak phosphorus.
None of this, needless to say, is good news for farmers, who according to the paper find themselves hit twice: once on the affordability of fertilisers when purchasing them, and then again (given food / fertiliser price differentials) on their profitability when using them.
Dorward and Poulton argue that in the short term, it’s still worth developing country governments’ while to subsidise fertiliser use, even if the rates of return are lower – and that donors need to step up fast with additional financing (a proposal that the World Bank signalled its openness to in its ten point plan on food). Dorward, Poulton and the Bank all agree that the question of getting them to the right place – fast – is as important as the question of who picks up the bill.
In the longer term, the paper suggests, the focus needs to be on more integrated soil fertility management with greater use of organic materials [i.e. compost and manure] together with smarter use of inorganic fertilisers – an area of work that the big agricultural research institutes like CIMMYT are already focusing on heavily. Moving towards more integrated soil fertility management already makes sense for reasons of environmental sustainability. If fertiliser prices fail to fall in the longer term, these areas of research are also going to be one of the critical front lines in feeding 10 billion of us.