Nitrates supply disruption could impact food supply

LONDON (ICIS)–Supply of the food that we eat could be severely hampered by European halts in output by major fertilizer producers because of record high gas costs.

One major supplier of nitrates to northwest Europe reacted to the news that CF Industries had shut its two facilities in the UK, saying: “That is indeed alarming. I am on a business trip and the phone doesn‘t stop ringing because of the situation.”

Another major supplier of fertilizer to the UK market said: “For sure, this is a mega event. All depends on how long CF will be offline.”

In an already tight market, where the price of ammonium nitrate (AN) and calcium ammonium nitrate (CAN) are already at post 2008-2009 economic crisis highs, this could be severely damaging to the consumer, the farmer and producers of nitrogen fertilizers.

Wholesalers had been delaying purchases for spring 2022 application in the hope that prices would start to come down, but clearly this will no longer be the case, in the near-term at least.

Over the past days, there has been plenty of speculation about Russia producers cutting output or halting production because costs far outweigh the cost of the final product. This includes urea, CAN, AN and urea ammonium nitrate (UAN), all used as fertilizers for a whole host of essential foods consumed.

On Wednesday, US-based producer CF Industries shut production at its two facilities, in Billingham and Ince. Both plants are supplied by gas contracted to the UK NBP wholesale gas price, an official for CF Industries confirmed to ICIS.

Not only is production impacted by gas costs, a crucial electricity cable between Britain and France has been shut down, resulting in wholesale energy prices soaring.

The ICIS TTF October ’21 market closed at another record high of $24.26/MMBtu on 15 September, up 6% from the previous close. The UK NBP market also has touched on similar record highs.

Russia is the largest producer and user of AN in the world, followed by the US, and it is largely used for the production of wheat.

CAN is very popular in parts of northwest Europe such as Germany and the Benelux, France, Ireland, the UK and Poland, where soil is acidic. It is used for multiple crops and creates healthy yields of potatoes. It is also used for grassland agriculture to feed livestock.