As in many parts of the world, the ongoing harvests in Eastern Europe have suffered from a fertilizer crisis, and things could get worse.
That’s according to Hungarian producer Nitrogenmuvek Zrt, which forecasts a 15-20% drop in grain production this year in a region that includes major European exporters Romania and Poland.
Farmers have reduced nutrient use due to high prices and supply problems, at a time when drought has also threatened crops. Fertilizers have become more expensive as a surge in natural gas, a crucial feedstock, has pushed up costs and reduced output.
Sanctions on Belarusian potash and China’s move to control shipments have added to the crisis. That, in turn, threatens global crop supplies that have been affected by the war in the breadbasket nation of Ukraine.
There may not be much relief anytime soon. Concerns persist about a protracted gas crisis in Europe, which would be bad news for nutrient production.
“Winter is going to be extreme, everyone in the industry assumes there will be no gas supply,” said Zoltan Bige, chief strategy officer at Nitrogenmuvek.
Crop yields could fall further in Europe as the current season will be the first affected by the war, he said.
Another problem is that nitrate-based fertilizers, the preferred type in Europe, cannot be replaced with urea-based ones produced elsewhere, he said.
Hungary’s government said last week that the country’s wheat harvest could fall below four million tonnes, about a third less than the five-year average.
If European farmers continue to skimp on fertilizer, it will threaten crops that will be planted in the fall for harvest in 2023.
High gas prices pose a “critical” threat to the European fertilizer industry, industry group Fertilizers Europe said earlier this month. Nitrogenmuvek himself could exhaust his cash reserve in the next month and a half.
“We will not have a reserve for a possible negative scenario, such as a further increase in gas prices or possible unplanned maintenance,” Bige said.
Nitrogenmuvek is currently running at full capacity of around 4,000 tonnes per day, despite recent gains in gas prices, as it tries to make up for shortcomings caused by closures earlier this year.
This year’s production will probably fall 10% even if the situation remains as it is.
The big question is how they will affect gas costs and supplies
fertilizer production later in the year. “With gas prices the way they’ve been in the last few weeks, it wouldn’t even be worth producing,” Bige added. (Bloombergs)