Analytical Reports

Market Monitor September

Fuelling food prices: the role of fertilizer prices

The surge in agricultural input prices experienced over the last two years, especially those relying on energy derived from fossil fuels such as mineral fertilizers, has raised concerns about global food security. Mineral fertilizers play an important role in the agri-food sector by providing essential nutrients (nitrogen (N), phosphorus (P), and potassium (K)) for maintaining agricultural crop yield and quality. The production of mineral fertilizers depends on the availability of natural resources for raw material and energy to power the synthesis process, so only a few countries supply the market, making these heavily traded commodities sensitive to shocks at global scale.

Mineral fertilizer prices rose sharply in 2021 on account of rising energy and transport costs following the COVID19 pandemic and the EU/US's ban for Belarusian fertilizer exports. Prices climbed further due to the conflict in Ukraine and the subsequent sanctions imposed on shipments from the Russian Federation, a major fertilizer exporter, with some quotations increasing up to threefold compared to spring 2021.

A scenario analysis in this year's OECD-FAO Agricultural Outlook demonstrates how rising fertilizer costs can lead to higher food prices: for each hypothetical 1% increase in N-, P- and K-based fertilizer prices, agricultural commodity prices are estimated to increase by 0.2%, regardless of the initial level of prices. The impact is reflected more severely on crops that use fertilizers as direct inputs. However, even crops with lower fertilizing needs (such as soybean that naturally fixes nitrogen) would experience price increases due to substitution effects.

The mixed price effect within livestock products is explained by the difference in feeding across animals. On average, poultry and pigmeat would be the most impacted because their production relies heavily on compound feed manufactured from fertilizer-intensive crops.

The fertilizer module of the Outlook helps quantify the impacts of fertilizer price variations on crop commodities markets. As such, it will provide a welcome basis for discussions around food security in potential future fertilizer market crises. It will also help refine the baseline scenario of the Outlook, where global food consumption is currently expected to increase by a relatively modest 1.4% per year over the next decade on account of slower population and per capita income growth. Global production is also expected to grow slower than in previous decades due to a weakening of expected gross returns for producers, with a yearly rate of 1.1% over the next decade mostly driven by low- and middle income countries.

High prices should subsist in the short-term for most agricultural commodities in view of continued economic risks, uncertainty, and high inputs prices. However, in the medium- and long-term growing demand for agricultural commodities is expected to be matched by increased production and improved productivity, leading to flat or slightly declining prices in real terms. To maintain this long-term trend, sustained investments in raising yields and improved farm management remain essential.

Including fertilizers in the model is also relevant from an environmental perspective. Under a business-as-usual scenario, the anticipated growth in agricultural production will result in a 7.5% increase in direct global greenhouse gas emissions over the next decade, with mineral fertilizers accounting for 11% of the overall increase. Making agriculture less dependent on mineral fertilizers through the adoption of better farming practices (e.g., crop rotation, better allocation of fertilizers over the season, use of enhanced technologies, integration of organic fertilizer, limitation on the quantities applied) will contribute to global efforts to mitigate climate change and help alleviate pressure on food security.

World supply-demand outlook

WHEAT production in 2023 now falling by 2.6 percent below last year's level following a downward revision m/m on downgraded prospects in Canada and the EU owing to dry conditions, and in China due to heavy rains.
Utilization in 2023/24 lifted m/m, mostly reflecting higher utilization in India stemming from higher production prospects, and still rising slightly above the 2022/23 level.
Trade in 2023/24 (July/June) lowered this month and still heading for a decline from 2022/23 with a fall in shipments from Australia and Ukraine outweighing an increase in exports from Argentina and the Russian Federation.
Stocks (ending in 2024) raised slightly on upward revisions to inventories in the Russian Federation, Türkiye, Ukraine, and the US.

MAIZE production forecast for 2023 raised this month, with larger outputs expected in Brazil, India, and Ukraine, and now rising by 4.2% above last year's output.
Utilization in 2023/24 virtually unchanged m/m and forecast to increase by 1.6% largely on growth in feed use.
Trade in 2023/24 (July/June) lowered this month, mostly reflecting smaller sales expected for Ukraine and the US, and lower import demand in Asia, and now pointing to a 1.7% decline from 2022/23.
Stocks (ending in 2024) lifted m/m, on higher inventories in Brazil and Ukraine, and now expected to increase by 6.3% above opening levels.

RICE production in 2023/24 trimmed, as downgrades for Indonesia and Thailand, alongside somewhat lower output expectations for China and various other countries, outweighed increases primarily for Cambodia, Iran, Nigeria and the US.
Utilization in 2023/24 raised on greater food and industrial use expectations for India, which overshadowed a host of other revisions.
Trade in 2023 and 2024 lowered, with shipments in 2024 now seen recovering only modestly from the 2023 depressed level, especially if India's export restrictions prove protracted.
Stocks (2023/24 carry-outs) little changed from July, with carryovers in the major rice exporters seen expanding even more than previously envisaged, and largely driven by India, while aggregate reserves held by importers remain close to the eight-year low of 2022/23.

SOYBEAN 2023/24 production lowered marginally from July forecasts, primarily reflecting reduced prospects in the US amid lingering hot and dry weather conditions.
Utilization in 2023/24 trimmed, chiefly driven by a downward adjustment for Brazil, while global consumption is still anticipated to increase by 6% y/y.
Trade in 2023/24 (Oct/Sep) downscaled on smaller export supplies from the US, while import forecasts are lowered for Egypt, the EU and Viet Nam.
Stocks (2023/24 carry-out) virtually unchanged since July, confirming expectations of a marked recovery from opening levels.

Crop conditions around the world

Conditions at a glance


In the northern hemisphere, winter and spring wheat harvesting is wrapping up under mixed conditions with drought in several areas. In the southern hemisphere, there are expanding dry concerns in Argentina and Australia.


In the southern hemisphere, exceptional yields are expected in Brazil while poor outputs are expected in Argentina due to persistent drought. In the northern hemisphere, conditions remain mixed.


In China, dry and hot conditions expanded in the south and southwest. In India, Kharif crops have recovered from delayed rains in the east. In Southeast Asia, conditions are mostly favorable except in Thailand.


In the northern hemisphere, crops are developing under mixed conditions with some improvement in the western hemisphere due to enhanced rains.

El Niño Advisory and Positive IOD Watch

The El Niño-Southern Oscillation (ENSO) is currently in the El Niño phase and forecast to reach a strong level of intensity during October to January (66% chance) and remain active until March to May (82% chance), according to the IRI/CPC forecast.

El Niño events tend to result in wheat yield declines around 15% in Morocco and 5 percent or less in India, China, Australia, southeastern South America, and parts of Europe and North Africa, deficit maize production in India, China, southeastern Africa, and parts of Central America and northern South America, reduced rice yields in major production regions of South and Southeast Asia, and improved soybean yields in both the United States and Argentina and reduced yields in India.

Positive Indian Ocean Dipole (IOD) conditions are forecast for September to January, according to the Australian Bureau of Meteorology.

Positive IOD conditions typically enhance the drying influences of El Niño in Australia and the Maritime Continent, and substantially increase the chances of a wet and intense East Africa short rains season during El Niño events.

International prices


Prices mostly declined in August, the GOI sub-Index averaging four percent lower month-on-month, touching its lowest level since April 2021. Although fresh attacks on ports in both Ukraine and the Russian Federation underscored risks to Black Sea exports, traders witnessed continued solid deliveries from the latter at competitive prices. Markets also noted news that Ukraine was planning to resume shipments via the earlier announced seaborne corridor, while the Russian Federation was reportedly working on alternatives to the Black Sea Grain Initiative. Progressing northern hemisphere harvests also weighed, albeit with quality concerns in the EU and Ukraine, coupled with deteriorating production prospects in Canada and sub-optimal growing conditions in Argentina and Australia.


The GOI maize sub-Index dropped by an average four percent, marking a seventh monthly decline. Slow export demand weighed on US values, as did spillover pressure from wheat. However, concerns about the impact of adverse Midwest weather on yield potential offered support to prices, while export premiums were underpinned by rising freight costs due to low water levels on the Mississippi and Illinois Rivers. After an upturn following the introduction of the preferential exchange rate, farmer selling in Argentina subsided, while dryness-related worries ahead of 2023/24 plantings contributed to firmer prices. Solid export demand buoyed Brazilian quotations.


International rice prices surged in August as India's earlier export ban on non-basmati white rice, followed by restrictions on basmati and parboiled exports, underpinned sentiment, the GOI sub-Index gaining by 13%, on average. However, quotations were often nominal, with many sellers anticipating further increases. Expectations for future demand from Asian buyers such as Indonesia, contributed to firmer white and parboiled quotations in Thailand. In Vietnam, support came from tightening supplies, as traders focussed on completing earlier sales. Prices in Pakistan strengthened amid reports of high moisture content in new crop arrivals, albeit trading was generally quiet.


Pulled lower by declines in Brazil and the US, average international soyabean prices, as measured by the GOI sub-Index, retreated by 4% during August. After initially dropping on improving cropping weather, US prices subsequently rebounded, as a heatwave across the Midwest during the crucial pod-filling stage rekindled worries about yields. This was coupled with signs of tightening availabilities and an uptick in overseas demand, as evidenced by fresh sales to China and other destinations. While dollar-based prices in Brazil (Paranagua) also eased, in part linked to currency movements, export premiums were buoyed by solid local and international demand. In contrast, limited supplies saw nominal Up River quotations in Argentina edge higher month-on-month.

Futures markets

Futures prices

In July and August, wheat prices declined despite rising geopolitical tensions. The Russian Federation started the season with record-high grain exports, pressuring prices in global markets. Euronext's September 2023 futures dropped significantly, nearing the USD 237 per tonne support level, while Chicago traded below USD 210 per tonne. Meanwhile, even after the end of the Black Sea Grain Initiative and attacks on Danube River ports and grain facilities, Ukraine managed to export via alternative routes, albeit at higher costs and risks. For this reason Ukraine is currently exploring option to re-open its Black Sea ports, including by allowing ships to sail along a secure corridor protected by the country's defense system. While maize and soybean markets tightened in July on the back of mixed conditions in the US Midwest, prices were pressured in August amid strong export flows from Brazil. However, Brazilian ports seem close to their exporting capacity, raising concerns of congestion that might open the way for potential price rebounds. Macroeconomic factors like US financial instability, increasing Federal Reserve interest rates, and the US Dollar's strength added to market uncertainty.

Volumes & volatility

July recorded spikes in volatility, particularly in CME soybean and maize markets, driven by erratic weather in the US Corn Belt. In the wheat market, escalating Black Sea tensions and mixed US harvest outcomes led to bursts of volatility, pushing historical and implied volatility to the higher range of historically observed values. This heightened volatility led to record volume trading activity on Euronext wheat, with 1.7 million lots traded on the contract in July. Volatility declined in August, returning to levels seen earlier this year as crop conditions became clearer and with ample grain supplies from the Black Sea. While volatility for the new crop was generally lower than the previous year, concerns remain for a possible resurgence in volatility due to geopolitical tensions in the Black Sea and evolving logistical bottlenecks in the Mississippi River, the Panama Canal, or Brazil.

Forward curves

The influx of harvest supply from the Northern Hemisphere created a need for storage throughout the 2023/24 campaign. Consequently, grain markets now exhibit a steepened contango, with higher prices for longer-dated maturities to account for elevated storage expenses. The above-mentioned logistical bottlenecks could disrupt grain and soybean flows, which would increase the need for storage in affected countries even further and lead to higher price differentials between exporting areas.

Investment flows

Hedge Funds significantly reduced their investment portfolios in CME agricultural products, reaching a three-year low. The steepening contango incentivized commodity index traders to deleverage their positions in the grain segment due to higher rollover costs. Additionally, declining grain prices in 2023 diminished the attractiveness of grain commodities markets for investors.

Fertilizer outlook

After declining for more than a year, fertilizer prices across the board tested their support levels over the summer. New trade routes are now in place after the major shocks of 2021 and 2022, allowing markets to return to fundamentals. Purchase behavior could remain very cautious this crop year, while global supply seems sufficient at present.

Fertilizer input prices increased slightly in August. While natural gas prices were stable in the United States, European prices fluctuated substantially. Yet, while European gas supply was a great source of concern at this time last year, current stocks at exceptionally high levels should allow to start the winter with ample supply. Demand for ammonia reappeared at the end of the month, facing tighter availability from Trinidad and the Middle East, explaining a firmer price stance for this input used in nitrogen and phosphate fertilizer production.

Nitrogen fertilizer prices increased in August. Urea prices in the US Gulf and Brazil were up nearly 10% compared to last month. The global market was oriented upwards for most of the month until the Indian Potash Ltd. (IPL) purchase tender held mid-August revealed massive export availabilities out of China. Several markets eased as the month progressed and importers will now be comfortable buying hand to-mouth. In addition, purchases from farmers decreased because the so-called barter ratio - a measure of profitability - deteriorated on declining maize prices, as was the case in Brazil. Other nitrogen fertilizers, like Nitrates and Urea Ammonium Nitrate (UAN), will likely track urea prices for the rest of the year.

Phosphorus fertilizer prices increased substantially across major markets. Tight spot supply contributed to the price increases, on production issues in the Arab Gulf and limited prompt exports out of China. While origins aim at raising price ideas in the short term, the outlook points to a well-supplied market with cumulative export numbers out of China improving significantly since early 2023.

Potash prices in major importer Brazil were up slightly in August - although less than nitrogen and phosphorus fertilizer prices. Strong demand this month in Brazil drove the price uptick, though supplies remain sufficient. In the absence of other major buyers, potash prices may remain in their current range.