Fertilizer industry expert thinks current crisis may end well for ag

A crisis is brewing in fertilizer prices and availability. It’s deeper than most people realize and may have major ramifications including an eventual surge in grain prices. At least that’s the view of David Delaney, CEO of Houston-based Itafos. Delaney was formerly COO of PotashCorp, which is now Nutrien, so he’s familiar with Western Canada.

Itafos is a fertilizer company with operations in many countries. The flagship operation is its Conda facility in Idaho that produces monoammonium phosphate (MAP) and other products, some of which ends up in Western Canada. When the United States and Israel attacked Iran, Delaney recognized the threat and moved to amend the company’s sulfuric acid contract with the mining company Rio Tinto to assure price and supply.

Sulfuric acid is needed to turn phosphate rock into phosphate fertilizer. Sulfuric acid comes from sulfur and about 45 per cent of world sulfur normally comes through the Strait of Hormuz. In addition, Russia has stopped exporting sulfur. Delaney doesn’t expect a quick resolution to the Middle East conflict that’s been blocking the strait since the initial attacks on Iran back on Feb. 28.

While a lot of attention has been given to the blockage of nitrogen fertilizer and the LNG needed to manufacture it, the phosphate and sulfur ramifications are also serious.

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For the strait to open, negotiations between the U.S. and Iran have to be successful and while there have sometimes been hopeful signs, progress seems to be at a snail’s pace. Delaney thinks opening will take some time.

When if does finally open, it could take a month or two to unplug the backlog of ships. And will ships want to go back in? Will shipping insurance be available?

Plus, how much damage has been done to production and loading facilities? How many repairs will be needed and how many parts fabricated? No one really knows. Meanwhile, dozens of fertilizer manufacturing facilities around the world are offline due to lack of product.

Delaney believes crop yields will be reduced in many nations due to a lack of fertilizer availability. He has heard that up to 40 per cent of Brazilian acreage may not get any phosphate this year. Seeded acreage could even drop in some countries because fertilizer isn’t available.

He also believes many countries will be increasing their biofuel mandates to combat soaring fuel prices and reduce their reliance of fossil fuel imports. Some countries might also limit grain and oilseed exports to assure domestic supply.

Ramping up fertilizer production will take time. New plants require a huge investment. However, production just doesn’t happen if the raw materials aren’t available.

Logically, if worldwide grain production slips and grain stockpiles drop, prices should increase. Whether the increase in grain prices is sufficient to compensate for the extra costs is impossible to know. This magnitude of a fertilizer disruption has never been seen before, so predicting the ramifications is difficult, but Delaney believes it could trigger a new boom cycle for agriculture.

So, what should farmers do as they look forward to their fertilizer supply for 2027? Usually, buying in the summer, fall or early winter comes with a price saving. Prices are usually the highest just before seeding.

Delaney doesn’t have a crystal ball to know how this is all going to play out, but he thinks North American farmers need to be thinking not only of price, but also of availability particularly for phosphate and sulfur.