China Export Curbs On Fertilizer Could Worsen Global Food Price Shock
China’s move to impose export restrictions on fertilizers will be felt worldwide. Beijing’s increased scrutiny comes as global fertilizer markets have been battered by plant shutdowns and skyrocketing prices that may continue to boost food inflation well into 2022. Chinese Communist Party officials have called for stable fertilizer supplies and food security amid overseas turmoil.
On Oct. 15, Beijing implemented a new rule requiring additional inspection of fertilizer exports. The General Administration of Customs added new inspection requirements on urea to ammonium nitrate, according to Bloomberg.
Last month, a statement published on WeChat by the National Development and Reform Commission, China’s top economic planner, urged local authorities to ensure stable prices by keeping fertilizer plants operating despite widespread power cuts. This call for adequate fertilizer supplies is critical for the country to sustain agricultural production amid mounting food security risks.
Despite export curbs, Urea futures in Zhengzhou recently hit a new record high.
Bloomberg sources said some recent Chinese fertilizer cargoes had been delayed by customs for additional checks to obtain new export certificates. They said some shipments would be rerouted for domestic markets or face further delays.
A reduction in exports from China (a country that controls 30% of the global fertilizer market) could cause shortages in India, Pakistan, and Southeast Asia, the biggest buyers of its fertilizers. Higher prices could force farmers to plant less and or have to raise crop prices. The UN’s global food tracker is at a new decade high and may continue to soar higher.
Signs of a fertilizer shortage have already emerged. Europe may face difficulties sourcing fertilizer supplies at multiple domestic plants that have shuttered or reduced the output of the nutrients because of high natural gas prices. China’s export restrictions will make it harder for the euro area to import supplies. In South America, farmers in Brazil reported deliveries of fertilizer and glyphosate had been canceled. Higher prices mean farmers will have to shift to wheat and other feed grains that require fewer fertilizers.
Fertilizers are essential in providing crops with nutrients. If prices continue to rise, it may just increase global food prices that could eventually cause unease among folks in emerging countries.
Wed, 10/20/2021 – 04:15