Food Prices, Energy and Fertilizer Efficiency

There’s been a great deal of publicity of late on the increasing conjunction of agriculture and energy – the use of corn for ethanol production has knock-on effects for food costs, with the actual impact of the ethanol mandate accounting for some 20 percent of the recent runup in food costs according to IFPRI, the International Food Policy Research Institute. However, there is another point of commonality between food and fuel, and that is fertilizer. Food prices will only be stabilized and eventually reduced through increased production, and that is heavily dependent on fertilizer use. But while corn has gone from $3.05/bu. to $4.28/bu. between January ’07 and January ’08, fertilizer prices have been increasing even faster: For example, the Arab Gulf price of urea – the most commonly used form of nitrogen fertilizer – went from $272 to $415 per ton over the same period – a 50 percent increase. (The main input for producing urea is natural gas – hence the Arab Gulf base price.) So the increase in energy costs directly affects the costs of producing the food needed the mediate the price increases.

According to IFDC, the International Fertilizer Development Institute, the unprecedented rise in fertilizer prices is creating a fertilizer crisis for resource-poor farmers in developing countries. Particularly hard hit by the higher costs are farmers in chronically food insecure Sub-Saharan Africa, where fertilizer use is already the world’s lowest. It’s here that increased productivity is most urgently needed.

However, there’s another facet to the agriculture-energy nexus, and that is that fertilizer use is grossly inefficient. There have been practically no significant advances in fertilizer use technologies in decades. Only some 30 percent of the nutrients in urea, for example, end up being taken up by plants. The rest is lost, to the air and in stream runoff, which degrades water bodies and leads to the notorious “dead zones” in lakes and large areas of the ocean. Since it takes about four barrels of oil equivalent to produce one ton of urea, at current fertilizer use efficiencies some 2.8 barrels are wasted for every ton of urea applied. This is a cost that cannot continue to be borne in an increasingly constrained and crowded world.

Converting energy into food security through fertilizer and associated inputs is still highly cost effective, even at current prices. But increased fertilizer use efficiency would constitute a major contribution toward meeting the world’s agricultural productivity needs and would also return important environmental benefits. Going forward, this needs to be high on the list of priorities for the global community’s agricultural research agenda.