The World’s Food Security is In The Hands of China and Russia

and sometimes in unexpected ways. Today another example of that, Russia's invasion of Ukraine caused prices of fertilizer to spike in some countries. That means it's become harder to get enough to grow critical crops like corn, and even in places like the US where crops are plentiful, higher fertilizer costs will show up in higher food prices at the supermarket.

Why did this happen? My colleague Elizabeth Elkin covers this industry, and she's here to explain how fertilizer, just like oil, gas and semiconductors, has become wrapped up in the geopolitical rivalries between East and West Elizabeth. When we think about the war in Ukraine, and it's now been a year, and so I think we've all been thinking about it

a lot. Fertilizer is not one of the things that comes to the top of most people's minds, and yet this is a really big problem that began shortly after Russia invade the Ukraine. What happened. Yeah, absolutely, Fertilizer is obviously not one of the first things that you think about when you think about this war, but it is one of the most important things for food security. After Russia invaded Ukraine, we saw prices for fertilizer just go nuts because Russia is one of the top suppliers of

these really important nutrients to the entire world. When we weren't sure that exports were going to happen, we said, well, what do we do. You know, like a fifth of the world's fertilizer is in this country that now everybody is sanctioning, and we're just totally not sure that anything's going to make it out. So where do we make up for those nutrients and how do we continue to feed people? If fertilizer prices are super expensive, then that

means that it is way more expensive. Even if you can get fertilizer to grow crops, and so then that can help push up the price of crops, and so all of that plays into your food supply, right. So like if it's super expensive to make crops in the US, we probably weren't going to see shortages of food, but we have seen like astronomical food inflation, and a big

part of that is fertilizer. And one of the things we really did see that I think a lot of people notice we're grain prices, wheat in particular, rising because exports from Ukraine and other places had been kind of curtailed or cut off. But the fertilizer problem is something

that goes into the years ahead. Yeah, absolutely, And so that's one of the things that was really tough at the start of this is it's hard to tell how much the price and supply of fertilizer is going to impact food prices because you apply fertilizer for a crop that you won't eat for a long time. If you're trying to grow wheat and you don't put down enough fertilizer,

what happens is you get less wheat. When you're going to take that wheat out of the ground and so then the levels of nutrients in the soil go down, and they can go down for more time than us to this season, right, and so then you just end up with this whole like sort of supply chain issue for you know, it can be I mean a long time. So then the next year's yield is lower, and then you get into this kind of downward spiral. Yeah, and then you have to maybe apply more nutrients than you

ever would have later. It just depends really on where you are, the nutrient content of the soil. It's very specific two different crops. It just it's really hard to say if I don't apply this fertilizer that I need, what's going to happen next year and the next year and the next year. It varies depending on who's planting. And of course, like every crop now, this is science, So your crop is calculated with a certain amount of fertilizer, a certain type of fertilizer. And it's not like you

can just oh, substitute something else, No, definitely not. And corn makes corn syrup which goes into like soda and everything that we eat, and there's a lot of corn syrup in the food that we consume. So corn is super super important and you can't skip applying a certain type of fertilizer to corn. It's it's called nitrogen. Every year you have to apply nitrogen or yield drops dramatically.

Rebecca chass On, our producer in New York, and Katherine Fink, our producer in Washington, went out to ask people if they had any idea what's in the fertilizer used to grow the food they eat? Um? Nitrogen? Um, okay, I just got nitrogen. Sounds like something not healthy. Oh, I have no idea, No, no idea. Too phosphate, it's one of them. Um my trite tongue. I know this one. I know this all. I used to be a geology manager, Elizabeth. As you heard there, people me included don't really have

an idea of what's in fertilizer. You mentioned nitrogen. One guy in the clip got that right, But we tend to think about it as something in a bag you pour over the dirt and who knows what's in it. So, what are the main components of commercial fertilizer. Yeah, so there's three main nutrients that people put down on the ground, and you know there's other stuff that goes on too, but these are the big three. It's nitrogen, phosphate, and potash.

Potash and phosphate are both mined. Nitrogen is created through a process called the Haberbosh process. It's synthetic nitrogen fixation, which just means that you're taking nitrogen from the air and converting it into a form that a plant can use. Nitrogen is generally thought of as the most important because there are plants like corn that you have to apply it every year. It's the one that farmers are not

going to skip. If they can skip anything, they're going to start with potash and then they're going to go to phosphate. And then if you see them skipping nitrogen, that's when you know that things are really bad. And so phosphate and potash as you are, you actually have to get it out of the ground, similar to the way you would even mind coal. Can you actually describe what is it like to mine potash? So I visited a mine up in Canada late last year. It's very

very cold in Saskatchewan. Inside the mine it's actually really hot. So you know, I'm because it's so deep, so deep underground, right, So I'm wearing like basically a parka with three other layers underneath, because if you've ever been to Saskatchewan, Canada in early December or late November, it is cold, I mean cold. And then you get down in the mine and you're in all your protective equipment, you know, so

that rocks don't fall on you, nothing hurts you. You know, you have to sort of like gear up, and I am like sweating under all of my layers that I'm wearing because I'm in Saskatchewan, Canada. So it's like in the eighties degrees fahrenheit down in the mines. Does it look like down So it's interesting. I thought there would be more like lights and things, So it's actually really dark and the only lights come from like your car and your headlamp because your car. They drive around little

cars down there. Because it's so huge, I mean, it's like miles and miles underground, and so if you're just walking that would take a lot of time and also be not so safe to just have people like wandering around down there. Right, So they have you go down this like huge elevator, which everything that's down in the mine had to come down that elevator and be built underground,

which is super fascinating. So all of the cars, all of the equipment, everything came down this elevator and then you're down there and you're surrounded by this super old rock. There's like a lot of pinks in it. So they're pulling up tons of this stuff up. Yeah. Yeah. So they've got these huge, like boring machines that cut into

the wall of the rock. Makes all this noise. You wear these head phones and around you like the air tastes like salt because there's a high salt content of the rock, and so it's like it's almost like being in the ocean. You know, it's like a weird sort of I mean, I grew up on the beach and I was like, oh, this is kind of like being

back home on the beach. And then it moves on these conveyor belts and then they take it up above ground and then they process it and so you can go into like their facilities where they're storing it, and it's like these huge i mean almost like big mountains of snow, except it's potash. The thing about potash is the top three countries that you mine potash out of

our Canada and then it's Russia and Belarus. The US and Allies had already imposed sanctions on Belarus for other things before the war, and so that supply was already constrained. And then you get the issues out of Russia, right, and then suddenly countries that usually wouldn't go to Canada for this stuff like knocking on Canada's door saying, please please please think of us when you are mining your potash,

like we really really really need to secure potash. And there was another knock on effect, which is from China, but it was kind of the opposite of what was happening with Russia. Is that right? Yeah? Absolutely, So China has decided to keep a lot of product in country, and they're a big producers, and they're a big producer. A lot of product comes out of China, and usually they're a pretty big exporter, and they have mostly stopped

exporting a lot of fertilizer. And so at the same time as you had question mark will stuff come out of Russia and we have seen very little products come out of Belarus since sanctions, you also have China saying we want to make sure that we have supply in country. And the thing about China is it's really really hard to tell what their fertilizer stocks look like. We just don't have really an eye on the ground on that.

Even major companies kind of don't know what supplies in China look like, and so it's really hard to tell at what point they're going to say, Okay, enough, we can just start exporting again. We don't think that's happening anytime soon. Elizabeth, Please stay with me. We'll keep talking

after the break. Elizabeth. Before the break, you were talking about fears about fertilizer supplies dwindling from Russia and China for different reasons, which brings us to another big fertilizer producer, the United States, And a lot of what the US producers isn't intended for export, is just used to meet

the huge demands of American agriculture. In the US, we have the number one producer of nitrogen fertilizer in the world, and they have an able to produce nitrogen fertilizer at a much lower cost compared to a lot of the world, especially because natural gas is the number one input for nitrogen fertilizer. Most nitrogen fertilizer in the world. In Europe,

we had like a fuel crisis, right. I mean we had because of the war, we had prices for natural gas exploding in Europe, and so a lot of European nitrogen fertilizer producers closed down, and so that has also caused supply squeeze. Right. So then you have CF Industries, which is the world's biggest producer of nitrogen fertilizer. They're in the US and suddenly they can make nitrogen much

cheaper than almost anywhere else. We've had a pretty good go of nitrogen in the US, right, And CF has actually started to export more than they did before the war, just because they can get good bang for their buck if they can get their product abroad, which has been an interesting sort of like difference in the US market then we saw before the war. So the US hasn't suffered as much as some other countries simply because there's pretty good supply. Yeah. I mean, we're right next to

Canada with all of its potash. We've got CF in the US, and we've also got Mosaic, which is another huge producer in the US, and they do phosphate and potash, and so we've had a pretty good supply of fertilizer. I mean, prices have still been high because it's a global market, so of course prices are high everywhere, but the US hasn't really had a shortage problem. Elizabeth, we talked about how in countries that produce fertilizer, the US, Canada,

they've been somewhat isolated from these shocks. But that's not true in a lot of the biggest consuming nations of fertilizers, especially developing nations that really really need this just for basic necessities. Yeah, so it's sort of a classic case

of halves and have knots here. So you have places like the US where we are largely doing okay because we you know, we have supply and we already are like a pretty wealthy country, right, and then you've got places like Africa where they just can't get the product. I mean, even those sanctions don't directly impact Russian fertilizer. They've been very clear about that, right, sanctions don't extend

to fertilizers. So Russia is free to export fertiles. Yes, Russia's free to export fertilizer in the same way that it should be free to export grains. We count that as a necessity for food, and so they should be free to export this fertilizer, but it has totally gummed up the supply chain. So you've got ships unsure if they want to touch the fertilizer because they're afraid of somehow falling under sanctions. And also product is moving in a different way than it used to, and so some

of those supply chains make it really really difficult. Well, one example you write about is Malawi. Yeah, tell us about their experience right now. Malawi is already one of the poorest places in the world. I mean, they really struggle. And then now on top of that, you have i mean it's been months trying to get them the supply

of fertilizer that they need. That is pushing back the ability to grow crops because you can't just apply fertilizer at any point in the year when they need the fertilizer. They need the fertilizer. And that's sort of what Balawi is facing right now, is that long term Okay, if we can't get our fertilizer, how do we feed these people? But it's not just there. You also write that countries in other regions of the world are suffering in the

same way. Yeah, exactly, it's not just African nations. For example, go to the other side of the Earth, and then you've got Peru, which is actually turning to guano, which has been used as a fertilizer in the past. It is bird poop. It has been proven to be a really good source of nutrients for crops. If they can't get the product that they need, guano is a good

alternative for them. Well, I mean, there's a lot of birds, so you can see how they produced a lot of guano that I suppose could be collective, but they don't do it in all one place, So how do they actually collect it? Yeah, so I think that the birds like certain areas, and so you just I mean, go to where the birds are and you collect the guano and then it's used as a fertilizer. And it's not just bird guano. They can use bat guano too, So there are a lot of different types of guano that

can be used. That doesn't seem like it's going to be a viable solution, No, especially not to feed like the massive amount of people on this earth. We'll be right back, Elizabeth. Given all the concerns that we're talking about that there might not be enough fertilizer to meet demand. Are there other fertilizers, other things that can be used to make up for the shortfall. You know a lot

of people talk about manure. It's more difficult to collect large quantities of it than it is to just get the synthetic nutrients right, And so you have that issue. But then you also have the issue of the reason why we originally created the haber Bosch process that makes nitrogen fertilizers because people were worried about an impending food crisis. So if you look back historically, there were people talking a lot about how are we going to feed people?

Population keeps growing, and the manure and guano and all of these other things don't create enough nutrients. There's just not enough of it. The nutrient content is also not high enough to continue to feed the growing population of the Earth. And so when they created the way to make nitrogen fertilizer, that was considered the most incredible invention because it allowed population to continue growing. You can't really just say, okay, well we can't get fertilizer, let's get

cowmanure because it just doesn't work the same way. And you know, we talk about composting and stuff like that. It's a great way to reduce landfill, you know, but it's not a replacement for synthetic fertilizer. Composting is great for your kitchen, etc. Like for your little farm or your little your little garden, but it doesn't work for like a massive grains farm that's trying to produce tons and tons of corn to feed the world. So what

is the solution. How eventually do we correct this problem and kind of turn the faucet back on of getting fertilizer where it needs to go. A lot of countries are trying to increase their in country ability to make new fertilizer and make more fertilizer. So you've got grant money being thrown at it. You've got countries that are trying to make new alliances with other countries, and you've got countries that are trying to make different kinds of connections.

So you have Brazil went to Canada and asked Canada, like, can you provide us with more potash? And so you get countries that are trying to like build different connections in addition to trying to increase the amount of nutrients that they can make in country. There are also a lot of people that are working on alternatives to synthetic fertilizer.

I mean, there's a lot of people who are working on like microbes, using like other kinds of technology to make fertilizer in a different way than it's made now.

And the hope for that is that it can be a little bit more environmentally friendly too, because the way that we make fertilizer right now is not environmentally friendly, and there's also a lot that gets run off into waterways and notions, and you know, giant like algae blooms and things like fertilizer contributes to a lot of environmental problems, and so the hope also is that you can find something that might be little less of an environmental hazard.

So when you look down the road, is someone who writes about fertilizer all the time, what do you see? It's gonna be a while before we have anything that really really is a major replacement for a lot of product. I don't think that anyone who is a professional, like in the fertilizer industry thinks that anything will ever totally overtake synthetic fertilizer. But a lot of people hope that there will be something that can help take some amount

of that off. And so not only does that help contribute to keeping prices low because we won't be so dependent on all of these international markets and things, but also maybe it'll help solve some of the environmental problems that fertilizer causes. Elizabeth Alkin, thanks for coming on the show, Thanks for having me, Thanks for listening to us here at The Big Take. It's a daily podcast from Bloomberg

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