June 10, 2008 / 12:07 AM / in 10 years

New threat to food system: pricey fertilizer

WASHINGTON/WINNIPEG (Reuters) - It powered the Green Revolution and helped save millions from starvation, but now one of the most important tools on the farm is being priced out of reach for many of the world’s growers.

<p>A farmer spreads fertilizer on a rice field in La village, 20 km (12.5 miles) outside Hanoi April 16, 2008. REUTERS/Kham</p>

With food prices soaring and stocks thinning, the world is in need of bumper harvests but once one of most bountiful of commodities, fertilizer, is becoming scarce and expensive.

It’s estimated that one third of the protein consumed by humans is a result of fertilizer. So high prices and spot shortages are yet another stress on the world’s ailing food system.

“You can’t really expect a bigger harvest if you will not use fertilizer, but the cost is killing us,” rice farmer Jaime Tadeo in the Philippines told Reuters, adding that a bag of fertilizer now sells for nearly 1,800 pesos, or $43, up from less than 1,000 pesos a year ago.

“It’s totally out of our control because if prices of oil continue to shoot up, the prices of fertilizers will also increase. I am afraid, many of us would not be able to afford it.”

Fertilizers are like vitamins for soil and consists of three main types, nitrogen, potash and phosphate.

Because some fertilizers such as nitrogen require energy to produce they track energy prices. But other kinds are just in high demand, even though experts say the shortages are not due to a lack of supply.

Last month China agreed to pay more than triple what they did a year ago to get hold of tight supplies of potash, sending the shares of global fertilizer makers to record levels.

China, the world’s biggest import market for the nutrient, will pay $650 to $670 a metric ton for the product, analysts estimated.

“With the intense pressure on global food production and continued growth in potash demand, this is the reality for our industry for the foreseeable future,” said Bill Doyle, chief executive of Canada’s Potash Corp, the world’s top producer.

The rising price is a burden on rich and poor farmers alike as they represent a big investment upfront, despite high world prices for crops. If all goes well, a farmer can earn $3 for every $1 invested in fertilizer.

“We’re all hoping Mother Nature cooperates and we can fill the bins, because ...we’ve got a lot on the line,” said Robert McLean, a farmer in Canada’s grain belt as he hauled a tractor-trailer load of canola harvested last fall.

Phosphate prices are up 50 percent over last year at C$570 per metric ton when McLean, who grows wheat, barley and canola in south-central Manitoba, booked supplies in January.

Farmers who waited to buy until spring have had to cough up as much as C$1,230 per metric ton, McLean said.

“We were hearing reports it was going to go up quite a bit. Nobody envisioned that it would go up 100 percent. It’s just god-awful ugly, I think is a good way to express it,”

With enough rain and heat, fertilizer will help farmers reap historically high grain prices. But poor yields would leave them struggling to pay for next year’s supplies.

GREEN REVOLUTION

Fertilizers were seen crucial in the Green Revolution of the past few decades where farmers, especially in poor countries, were able to dramatically increase crop yields.

The Green Revolution took root in the 1940s and newly developed inorganic fertilizers -- leaving rudimentary additives such as manure in the dust -- helped spark an explosion in food production, and saved countries such a India from famine.

World fertilizer use grew more than 11 times from a mere 14.5 million metric ton in 1950 to 169.4 million in 2007, while population ballooned from 2.5 billion to 6.6 billion.

But now with high fertilizer and fuel prices, some worry many of the gains could unravel, putting strain on all farmers but especially in the developing world.

“This has been a significant problem for the low income farmer,” said Rajiv Shah, who manages the agriculture development program at the Bill and Melinda Gates Foundation, which has extensive aid programs in Africa.

He said fertilizer use has long been a challenge in Africa, where farmers use about one tenth of what is applied by American farmers.

But now the problems are worsening with farmers forced to use fertilizers even more sparingly. They are also facing shortages and dealing with unscrupulous dealers selling poor quality products. All in all they have a lot on the line this season.

“If it doesn’t rain that year, you can lose your entire crop and your family will struggle to get enough to eat,” Shah said in a telephone interview.

In the sultry, sprawling palm oil plantations of Malaysia, which produces one of the developing world’s most important cooking oils, shortages of fertilizers are already being felt.

“The fertilizer shortage is a huge problem,” said Martin Bek-Nielsen of United Plantations, who sees it as inevitable that some farmers will have to cut back.

“Most plantations will not cut back, but small holders who have limited sources will reduce input. The impact on yields will not be immediate, it will be felt in a year or so.”

Some believe one possible solution will be for higher government subsidies for poor farmers.

Pedro Sanchez of the Earth Institute at Columbia University said he thinks heavy subsidies for fertilizers is the best way for the farmer to cope with the “worrying” prices.

“The way they are coping is they are getting subsidized fertilizers and improved seeds,” he said. “And they are basically tripling their yields of their basic food crops, like corn. And they are having surpluses.”

(For pix click here USN2032488920080610&channelName=GCA-Agflation#a=1)

Reporting by Russ Blinch and Roberta Rampton; Additional reporting Naveen Thukral in Kuala Lumpur and Manny Mogato in Manila; Editing by Eddie Evans

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