What you need to know about rising fertilizer costs and its effects on our food system

What you need to know about rising fertilizer costs and its effects on our food system

By
Sam Panzer
November 22, 2021

This is a web version of FoodHack's 'This Week In Food' newsletter. Sign up here to receive the next edition to your inbox.


Smell something… off? That might just be a global agricultural crisis in the making.

There are a truckload of inputs that go into growing our food; Seed. Equipment. Fuel. Labor. Shipping. The costs of several of these are already setting record-highs, exerting major pressure on food growers and manufacturers.

But recently, we started to see a new pressure emerging on the food system: the cost and availability of fertilizer. So this week, we’re nosing in and talking about why it’s happening, who is most impacted, and what it all means for foodtech and consumers. 

Hold on to your potassium folks, we're about to deep-dive into all things fertilizers.

👎 By The Numbers

💩 Fertilizer prices in the US are now over $1,000 per ton, a whopping 250% increase over the year prior.

🍞 Wheat prices are up nearly 2x since last year, largely driven by a curbed yield from higher fertilizer costs.

🏷️ Supermarket sticker shock keeps getting worse. Meat, poultry, fish, and egg prices rose 1.7% in October alone, while beef prices shot up 3.1%–– that’s well ahead of (record-high) inflation. Globally, food prices are up 30% YoY, according to the UN’s Food & Ag Organization.

💵 $1 billion in increased shipping and inventory costs is what supply chain pains have already costs the US dairy industry.

🚜 5 mph. That’s how fast (or slow) one farmer drove down Newcastle’s A1 highway in the UK to protest rising fuel prices, disrupting traffic for hours. That mirrors the plummeting sentiment of US farmers looking ahead to major cost increases next year.

All in all, costs are going up for everyone with no signs of stopping any time soon.

👀 What’s going on?

Let’s zip through the forces driving fertilizer prices up:

🏭 1. Rising natural gas prices in Europe.

Natural gas prices rose as much as 400% over last year, as producers struggle to ramp up output amidst increased demand. Why does natural gas impact fertilizer prices? Because natural gas is the main input for ammonia production, and ammonia in turn is the main input for nitrogen fertilizers. Here's the process:

Natural gas ➡️  ammonia ➡️  fertilizer ➡️  food.

That price pressure on natural gas led manufacturers of ammonia and fertilizer like BASF to slow or stop production this fall, driving up prices and driving down availability.

Source:
https://cen.acs.org/business/Expensive-inputs-strong-demand-send/99/web/2021/11

🇨🇳 2. China cutting fertilizer production (and exports).

Fearing food shortages at home, both China and Russia locked down their fertilizer exports, further disrupting the global flow of crop nutrients. That’s especially bad news for India and Pakistan, leading importers of Chinese and Russian fertilizer. 

🇺🇸 3. Supply disruptions in the USA. 

Hurricane Ida shut several key US fertilizer plants in September, on top of ongoing pandemic-driven supply chain disruptions and labor shortages, with experts warning farmers to plan their fertilizer orders months earlier than usual.

These specific pressures on fertilizer production aren’t happening in a vacuum. Instead, they’re stacking up on top of severe problems facing food production, including last year’s North American drought, an ongoing labor shortage, and sky-high shipping costs for both overseas and truck cargo. A perfect sh*tstorm?

🧑‍🌾 Farm Finance

Ok, the world’s messed up and fertilizer is more expensive. But how exactly does that translate to higher food costs?

Let’s say you’re a mid-sized farmer growing corn and soybeans in Iowa. Here’s what you might have planned for the 2021 harvest:*

  • Fertilizer costs (nitrogen, phosphate, potassium): $100 per acre / $0.50 per bushel
  • Everything else (seed, machinery, labor, and land): $550 per acre / $2.75 per bushel
  • Total: $650 per acre / $3.25 per bushel

*Data from Iowa State University’s “Estimated Costs of Crop Production in Iowa - 2021” workbook.

If fertilizer prices double, that means you’re paying $200 per acre or $1 per bushel, increasing total farm costs by 15%.

To hear what that means for farmers, I spoke to my friends Don & Lynnette Wiest, who farm corn and soybeans on a 700-acre family farm in Sibley County, Minnesota. Don explained:

"It is quite probable that fertilizer costs for a corn/soybean rotation could likely be as high as $325/acre next year, up from about $170/acre just last year. We normally fertilize about 350 acres for corn and soybeans each year, so the additional cost for plant nutrition will amount to over $54,000.00 additional cost. That’s all when other costs of production are added such as diesel fuel (up from $ 1.80 to $3.10), repairs and parts up at least 10%, chemicals, insurance, labor and other non land costs also climbing with the rate of inflation."

The crop prices we read and plan around are often traded in markets well before they’re actually produced, via “futures” trading. That means there is a disconnect between what’s happening on the farm and what buyers pay for the output, but the underlying pressure facing farmers like Don & Lynnette will have a massive impact on food production in 2022, and beyond. 

🔎 What does it all mean?

First and foremost, the fertilizer shortage is an acute risk to global food security, according to the World Bank. It will increase food prices, decrease food yields, and make the world less resilient to other disruptions to food production. 

The CEO of Norwegian chemical and fertilizer giant Yara is sounding the alarm bells, telling Fortune that:

"I want to say this loud and clear right now, that we risk a very low crop in the next harvest. I’m afraid we’re going to have a food crisis."

For foodtech, the main headlines are that inputs are about to get a lot more expensive. That will cut into margins for food products, especially those using commodity crops like pea, corn, and soy. Take peas. Even before the fertilizer shortage dawned, the chic protein source were in a pinch: the price of peas rose 120% over the previous year in Canada after a 45% drop in production and soaring demand. Other cheap commodity crops are very likely to be less cheap next week, with prices rising far faster than inflation.

I also see the current pressures on food production boosting companies in food waste, upcycling, local supply chains, and sustainable farming (we highlighted a few in last week’s 2022 predictions). The shortage may also drive investment into "green" ammonia, which seeks to pair ammonia production (which currently produces 1.8% of the worlds CO2) with renewable energy sources.

For Consumers, food prices will only continue rising. Consumers will shop more conservatively, spending less on ‘splurge’ items in the supermarket while cutting back on expensive stuff (like meat).

If there is a silver lining here, it's that we do expect this to accelerate consumer adoption of ‘alt proteins’ even as alt protein producers deal with their own substantial rising ingredient costs. A vegan burger made of 50% soybeans is still going to be a lot less impacted here than beef, which requires around 3 kg of grain to produce 1 kg of meat - making it potentially a more affordable grab at the supermarket aisle.

We don’t know how this will all shake out. But it’s an ominous addition to the (long-enough!) list of challenges slowly percolating through our food system and economy. As the chief agricultural economist at Wells Fargo put it, it’s “a slow-motion train wreck” 🚂

Sorry to start your week off on a low note folks, but where there's problems, there's opportunities. We'd love to know of businesses that are tackling the rising fertilizer and food costs - who knows, we might even do a follow-up piece to this too.


This is a web version of FoodHack's 'This Week In Food' newsletter. Sign up here to receive the next edition to your inbox.

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This is a web version of FoodHack's 'This Week In Food' newsletter. Sign up here to receive the next edition to your inbox.


Smell something… off? That might just be a global agricultural crisis in the making.

There are a truckload of inputs that go into growing our food; Seed. Equipment. Fuel. Labor. Shipping. The costs of several of these are already setting record-highs, exerting major pressure on food growers and manufacturers.

But recently, we started to see a new pressure emerging on the food system: the cost and availability of fertilizer. So this week, we’re nosing in and talking about why it’s happening, who is most impacted, and what it all means for foodtech and consumers. 

Hold on to your potassium folks, we're about to deep-dive into all things fertilizers.

👎 By The Numbers

💩 Fertilizer prices in the US are now over $1,000 per ton, a whopping 250% increase over the year prior.

🍞 Wheat prices are up nearly 2x since last year, largely driven by a curbed yield from higher fertilizer costs.

🏷️ Supermarket sticker shock keeps getting worse. Meat, poultry, fish, and egg prices rose 1.7% in October alone, while beef prices shot up 3.1%–– that’s well ahead of (record-high) inflation. Globally, food prices are up 30% YoY, according to the UN’s Food & Ag Organization.

💵 $1 billion in increased shipping and inventory costs is what supply chain pains have already costs the US dairy industry.

🚜 5 mph. That’s how fast (or slow) one farmer drove down Newcastle’s A1 highway in the UK to protest rising fuel prices, disrupting traffic for hours. That mirrors the plummeting sentiment of US farmers looking ahead to major cost increases next year.

All in all, costs are going up for everyone with no signs of stopping any time soon.

👀 What’s going on?

Let’s zip through the forces driving fertilizer prices up:

🏭 1. Rising natural gas prices in Europe.

Natural gas prices rose as much as 400% over last year, as producers struggle to ramp up output amidst increased demand. Why does natural gas impact fertilizer prices? Because natural gas is the main input for ammonia production, and ammonia in turn is the main input for nitrogen fertilizers. Here's the process:

Natural gas ➡️  ammonia ➡️  fertilizer ➡️  food.

That price pressure on natural gas led manufacturers of ammonia and fertilizer like BASF to slow or stop production this fall, driving up prices and driving down availability.

Source:
https://cen.acs.org/business/Expensive-inputs-strong-demand-send/99/web/2021/11

🇨🇳 2. China cutting fertilizer production (and exports).

Fearing food shortages at home, both China and Russia locked down their fertilizer exports, further disrupting the global flow of crop nutrients. That’s especially bad news for India and Pakistan, leading importers of Chinese and Russian fertilizer. 

🇺🇸 3. Supply disruptions in the USA. 

Hurricane Ida shut several key US fertilizer plants in September, on top of ongoing pandemic-driven supply chain disruptions and labor shortages, with experts warning farmers to plan their fertilizer orders months earlier than usual.

These specific pressures on fertilizer production aren’t happening in a vacuum. Instead, they’re stacking up on top of severe problems facing food production, including last year’s North American drought, an ongoing labor shortage, and sky-high shipping costs for both overseas and truck cargo. A perfect sh*tstorm?

🧑‍🌾 Farm Finance

Ok, the world’s messed up and fertilizer is more expensive. But how exactly does that translate to higher food costs?

Let’s say you’re a mid-sized farmer growing corn and soybeans in Iowa. Here’s what you might have planned for the 2021 harvest:*

  • Fertilizer costs (nitrogen, phosphate, potassium): $100 per acre / $0.50 per bushel
  • Everything else (seed, machinery, labor, and land): $550 per acre / $2.75 per bushel
  • Total: $650 per acre / $3.25 per bushel

*Data from Iowa State University’s “Estimated Costs of Crop Production in Iowa - 2021” workbook.

If fertilizer prices double, that means you’re paying $200 per acre or $1 per bushel, increasing total farm costs by 15%.

To hear what that means for farmers, I spoke to my friends Don & Lynnette Wiest, who farm corn and soybeans on a 700-acre family farm in Sibley County, Minnesota. Don explained:

"It is quite probable that fertilizer costs for a corn/soybean rotation could likely be as high as $325/acre next year, up from about $170/acre just last year. We normally fertilize about 350 acres for corn and soybeans each year, so the additional cost for plant nutrition will amount to over $54,000.00 additional cost. That’s all when other costs of production are added such as diesel fuel (up from $ 1.80 to $3.10), repairs and parts up at least 10%, chemicals, insurance, labor and other non land costs also climbing with the rate of inflation."

The crop prices we read and plan around are often traded in markets well before they’re actually produced, via “futures” trading. That means there is a disconnect between what’s happening on the farm and what buyers pay for the output, but the underlying pressure facing farmers like Don & Lynnette will have a massive impact on food production in 2022, and beyond. 

🔎 What does it all mean?

First and foremost, the fertilizer shortage is an acute risk to global food security, according to the World Bank. It will increase food prices, decrease food yields, and make the world less resilient to other disruptions to food production. 

The CEO of Norwegian chemical and fertilizer giant Yara is sounding the alarm bells, telling Fortune that:

"I want to say this loud and clear right now, that we risk a very low crop in the next harvest. I’m afraid we’re going to have a food crisis."

For foodtech, the main headlines are that inputs are about to get a lot more expensive. That will cut into margins for food products, especially those using commodity crops like pea, corn, and soy. Take peas. Even before the fertilizer shortage dawned, the chic protein source were in a pinch: the price of peas rose 120% over the previous year in Canada after a 45% drop in production and soaring demand. Other cheap commodity crops are very likely to be less cheap next week, with prices rising far faster than inflation.

I also see the current pressures on food production boosting companies in food waste, upcycling, local supply chains, and sustainable farming (we highlighted a few in last week’s 2022 predictions). The shortage may also drive investment into "green" ammonia, which seeks to pair ammonia production (which currently produces 1.8% of the worlds CO2) with renewable energy sources.

For Consumers, food prices will only continue rising. Consumers will shop more conservatively, spending less on ‘splurge’ items in the supermarket while cutting back on expensive stuff (like meat).

If there is a silver lining here, it's that we do expect this to accelerate consumer adoption of ‘alt proteins’ even as alt protein producers deal with their own substantial rising ingredient costs. A vegan burger made of 50% soybeans is still going to be a lot less impacted here than beef, which requires around 3 kg of grain to produce 1 kg of meat - making it potentially a more affordable grab at the supermarket aisle.

We don’t know how this will all shake out. But it’s an ominous addition to the (long-enough!) list of challenges slowly percolating through our food system and economy. As the chief agricultural economist at Wells Fargo put it, it’s “a slow-motion train wreck” 🚂

Sorry to start your week off on a low note folks, but where there's problems, there's opportunities. We'd love to know of businesses that are tackling the rising fertilizer and food costs - who knows, we might even do a follow-up piece to this too.


This is a web version of FoodHack's 'This Week In Food' newsletter. Sign up here to receive the next edition to your inbox.

This is a web version of FoodHack's 'This Week In Food' newsletter. Sign up here to receive the next edition to your inbox.


Smell something… off? That might just be a global agricultural crisis in the making.

There are a truckload of inputs that go into growing our food; Seed. Equipment. Fuel. Labor. Shipping. The costs of several of these are already setting record-highs, exerting major pressure on food growers and manufacturers.

But recently, we started to see a new pressure emerging on the food system: the cost and availability of fertilizer. So this week, we’re nosing in and talking about why it’s happening, who is most impacted, and what it all means for foodtech and consumers. 

Hold on to your potassium folks, we're about to deep-dive into all things fertilizers.

👎 By The Numbers

💩 Fertilizer prices in the US are now over $1,000 per ton, a whopping 250% increase over the year prior.

🍞 Wheat prices are up nearly 2x since last year, largely driven by a curbed yield from higher fertilizer costs.

🏷️ Supermarket sticker shock keeps getting worse. Meat, poultry, fish, and egg prices rose 1.7% in October alone, while beef prices shot up 3.1%–– that’s well ahead of (record-high) inflation. Globally, food prices are up 30% YoY, according to the UN’s Food & Ag Organization.

💵 $1 billion in increased shipping and inventory costs is what supply chain pains have already costs the US dairy industry.

🚜 5 mph. That’s how fast (or slow) one farmer drove down Newcastle’s A1 highway in the UK to protest rising fuel prices, disrupting traffic for hours. That mirrors the plummeting sentiment of US farmers looking ahead to major cost increases next year.

All in all, costs are going up for everyone with no signs of stopping any time soon.

👀 What’s going on?

Let’s zip through the forces driving fertilizer prices up:

🏭 1. Rising natural gas prices in Europe.

Natural gas prices rose as much as 400% over last year, as producers struggle to ramp up output amidst increased demand. Why does natural gas impact fertilizer prices? Because natural gas is the main input for ammonia production, and ammonia in turn is the main input for nitrogen fertilizers. Here's the process:

Natural gas ➡️  ammonia ➡️  fertilizer ➡️  food.

That price pressure on natural gas led manufacturers of ammonia and fertilizer like BASF to slow or stop production this fall, driving up prices and driving down availability.

Source:
https://cen.acs.org/business/Expensive-inputs-strong-demand-send/99/web/2021/11

🇨🇳 2. China cutting fertilizer production (and exports).

Fearing food shortages at home, both China and Russia locked down their fertilizer exports, further disrupting the global flow of crop nutrients. That’s especially bad news for India and Pakistan, leading importers of Chinese and Russian fertilizer. 

🇺🇸 3. Supply disruptions in the USA. 

Hurricane Ida shut several key US fertilizer plants in September, on top of ongoing pandemic-driven supply chain disruptions and labor shortages, with experts warning farmers to plan their fertilizer orders months earlier than usual.

These specific pressures on fertilizer production aren’t happening in a vacuum. Instead, they’re stacking up on top of severe problems facing food production, including last year’s North American drought, an ongoing labor shortage, and sky-high shipping costs for both overseas and truck cargo. A perfect sh*tstorm?

🧑‍🌾 Farm Finance

Ok, the world’s messed up and fertilizer is more expensive. But how exactly does that translate to higher food costs?

Let’s say you’re a mid-sized farmer growing corn and soybeans in Iowa. Here’s what you might have planned for the 2021 harvest:*

  • Fertilizer costs (nitrogen, phosphate, potassium): $100 per acre / $0.50 per bushel
  • Everything else (seed, machinery, labor, and land): $550 per acre / $2.75 per bushel
  • Total: $650 per acre / $3.25 per bushel

*Data from Iowa State University’s “Estimated Costs of Crop Production in Iowa - 2021” workbook.

If fertilizer prices double, that means you’re paying $200 per acre or $1 per bushel, increasing total farm costs by 15%.

To hear what that means for farmers, I spoke to my friends Don & Lynnette Wiest, who farm corn and soybeans on a 700-acre family farm in Sibley County, Minnesota. Don explained:

"It is quite probable that fertilizer costs for a corn/soybean rotation could likely be as high as $325/acre next year, up from about $170/acre just last year. We normally fertilize about 350 acres for corn and soybeans each year, so the additional cost for plant nutrition will amount to over $54,000.00 additional cost. That’s all when other costs of production are added such as diesel fuel (up from $ 1.80 to $3.10), repairs and parts up at least 10%, chemicals, insurance, labor and other non land costs also climbing with the rate of inflation."

The crop prices we read and plan around are often traded in markets well before they’re actually produced, via “futures” trading. That means there is a disconnect between what’s happening on the farm and what buyers pay for the output, but the underlying pressure facing farmers like Don & Lynnette will have a massive impact on food production in 2022, and beyond. 

🔎 What does it all mean?

First and foremost, the fertilizer shortage is an acute risk to global food security, according to the World Bank. It will increase food prices, decrease food yields, and make the world less resilient to other disruptions to food production. 

The CEO of Norwegian chemical and fertilizer giant Yara is sounding the alarm bells, telling Fortune that:

"I want to say this loud and clear right now, that we risk a very low crop in the next harvest. I’m afraid we’re going to have a food crisis."

For foodtech, the main headlines are that inputs are about to get a lot more expensive. That will cut into margins for food products, especially those using commodity crops like pea, corn, and soy. Take peas. Even before the fertilizer shortage dawned, the chic protein source were in a pinch: the price of peas rose 120% over the previous year in Canada after a 45% drop in production and soaring demand. Other cheap commodity crops are very likely to be less cheap next week, with prices rising far faster than inflation.

I also see the current pressures on food production boosting companies in food waste, upcycling, local supply chains, and sustainable farming (we highlighted a few in last week’s 2022 predictions). The shortage may also drive investment into "green" ammonia, which seeks to pair ammonia production (which currently produces 1.8% of the worlds CO2) with renewable energy sources.

For Consumers, food prices will only continue rising. Consumers will shop more conservatively, spending less on ‘splurge’ items in the supermarket while cutting back on expensive stuff (like meat).

If there is a silver lining here, it's that we do expect this to accelerate consumer adoption of ‘alt proteins’ even as alt protein producers deal with their own substantial rising ingredient costs. A vegan burger made of 50% soybeans is still going to be a lot less impacted here than beef, which requires around 3 kg of grain to produce 1 kg of meat - making it potentially a more affordable grab at the supermarket aisle.

We don’t know how this will all shake out. But it’s an ominous addition to the (long-enough!) list of challenges slowly percolating through our food system and economy. As the chief agricultural economist at Wells Fargo put it, it’s “a slow-motion train wreck” 🚂

Sorry to start your week off on a low note folks, but where there's problems, there's opportunities. We'd love to know of businesses that are tackling the rising fertilizer and food costs - who knows, we might even do a follow-up piece to this too.


This is a web version of FoodHack's 'This Week In Food' newsletter. Sign up here to receive the next edition to your inbox.

This is a web version of FoodHack's 'This Week In Food' newsletter. Sign up here to receive the next edition to your inbox.


Smell something… off? That might just be a global agricultural crisis in the making.

There are a truckload of inputs that go into growing our food; Seed. Equipment. Fuel. Labor. Shipping. The costs of several of these are already setting record-highs, exerting major pressure on food growers and manufacturers.

But recently, we started to see a new pressure emerging on the food system: the cost and availability of fertilizer. So this week, we’re nosing in and talking about why it’s happening, who is most impacted, and what it all means for foodtech and consumers. 

Hold on to your potassium folks, we're about to deep-dive into all things fertilizers.

👎 By The Numbers

💩 Fertilizer prices in the US are now over $1,000 per ton, a whopping 250% increase over the year prior.

🍞 Wheat prices are up nearly 2x since last year, largely driven by a curbed yield from higher fertilizer costs.

🏷️ Supermarket sticker shock keeps getting worse. Meat, poultry, fish, and egg prices rose 1.7% in October alone, while beef prices shot up 3.1%–– that’s well ahead of (record-high) inflation. Globally, food prices are up 30% YoY, according to the UN’s Food & Ag Organization.

💵 $1 billion in increased shipping and inventory costs is what supply chain pains have already costs the US dairy industry.

🚜 5 mph. That’s how fast (or slow) one farmer drove down Newcastle’s A1 highway in the UK to protest rising fuel prices, disrupting traffic for hours. That mirrors the plummeting sentiment of US farmers looking ahead to major cost increases next year.

All in all, costs are going up for everyone with no signs of stopping any time soon.

👀 What’s going on?

Let’s zip through the forces driving fertilizer prices up:

🏭 1. Rising natural gas prices in Europe.

Natural gas prices rose as much as 400% over last year, as producers struggle to ramp up output amidst increased demand. Why does natural gas impact fertilizer prices? Because natural gas is the main input for ammonia production, and ammonia in turn is the main input for nitrogen fertilizers. Here's the process:

Natural gas ➡️  ammonia ➡️  fertilizer ➡️  food.

That price pressure on natural gas led manufacturers of ammonia and fertilizer like BASF to slow or stop production this fall, driving up prices and driving down availability.

Source:
https://cen.acs.org/business/Expensive-inputs-strong-demand-send/99/web/2021/11

🇨🇳 2. China cutting fertilizer production (and exports).

Fearing food shortages at home, both China and Russia locked down their fertilizer exports, further disrupting the global flow of crop nutrients. That’s especially bad news for India and Pakistan, leading importers of Chinese and Russian fertilizer. 

🇺🇸 3. Supply disruptions in the USA. 

Hurricane Ida shut several key US fertilizer plants in September, on top of ongoing pandemic-driven supply chain disruptions and labor shortages, with experts warning farmers to plan their fertilizer orders months earlier than usual.

These specific pressures on fertilizer production aren’t happening in a vacuum. Instead, they’re stacking up on top of severe problems facing food production, including last year’s North American drought, an ongoing labor shortage, and sky-high shipping costs for both overseas and truck cargo. A perfect sh*tstorm?

🧑‍🌾 Farm Finance

Ok, the world’s messed up and fertilizer is more expensive. But how exactly does that translate to higher food costs?

Let’s say you’re a mid-sized farmer growing corn and soybeans in Iowa. Here’s what you might have planned for the 2021 harvest:*

  • Fertilizer costs (nitrogen, phosphate, potassium): $100 per acre / $0.50 per bushel
  • Everything else (seed, machinery, labor, and land): $550 per acre / $2.75 per bushel
  • Total: $650 per acre / $3.25 per bushel

*Data from Iowa State University’s “Estimated Costs of Crop Production in Iowa - 2021” workbook.

If fertilizer prices double, that means you’re paying $200 per acre or $1 per bushel, increasing total farm costs by 15%.

To hear what that means for farmers, I spoke to my friends Don & Lynnette Wiest, who farm corn and soybeans on a 700-acre family farm in Sibley County, Minnesota. Don explained:

"It is quite probable that fertilizer costs for a corn/soybean rotation could likely be as high as $325/acre next year, up from about $170/acre just last year. We normally fertilize about 350 acres for corn and soybeans each year, so the additional cost for plant nutrition will amount to over $54,000.00 additional cost. That’s all when other costs of production are added such as diesel fuel (up from $ 1.80 to $3.10), repairs and parts up at least 10%, chemicals, insurance, labor and other non land costs also climbing with the rate of inflation."

The crop prices we read and plan around are often traded in markets well before they’re actually produced, via “futures” trading. That means there is a disconnect between what’s happening on the farm and what buyers pay for the output, but the underlying pressure facing farmers like Don & Lynnette will have a massive impact on food production in 2022, and beyond. 

🔎 What does it all mean?

First and foremost, the fertilizer shortage is an acute risk to global food security, according to the World Bank. It will increase food prices, decrease food yields, and make the world less resilient to other disruptions to food production. 

The CEO of Norwegian chemical and fertilizer giant Yara is sounding the alarm bells, telling Fortune that:

"I want to say this loud and clear right now, that we risk a very low crop in the next harvest. I’m afraid we’re going to have a food crisis."

For foodtech, the main headlines are that inputs are about to get a lot more expensive. That will cut into margins for food products, especially those using commodity crops like pea, corn, and soy. Take peas. Even before the fertilizer shortage dawned, the chic protein source were in a pinch: the price of peas rose 120% over the previous year in Canada after a 45% drop in production and soaring demand. Other cheap commodity crops are very likely to be less cheap next week, with prices rising far faster than inflation.

I also see the current pressures on food production boosting companies in food waste, upcycling, local supply chains, and sustainable farming (we highlighted a few in last week’s 2022 predictions). The shortage may also drive investment into "green" ammonia, which seeks to pair ammonia production (which currently produces 1.8% of the worlds CO2) with renewable energy sources.

For Consumers, food prices will only continue rising. Consumers will shop more conservatively, spending less on ‘splurge’ items in the supermarket while cutting back on expensive stuff (like meat).

If there is a silver lining here, it's that we do expect this to accelerate consumer adoption of ‘alt proteins’ even as alt protein producers deal with their own substantial rising ingredient costs. A vegan burger made of 50% soybeans is still going to be a lot less impacted here than beef, which requires around 3 kg of grain to produce 1 kg of meat - making it potentially a more affordable grab at the supermarket aisle.

We don’t know how this will all shake out. But it’s an ominous addition to the (long-enough!) list of challenges slowly percolating through our food system and economy. As the chief agricultural economist at Wells Fargo put it, it’s “a slow-motion train wreck” 🚂

Sorry to start your week off on a low note folks, but where there's problems, there's opportunities. We'd love to know of businesses that are tackling the rising fertilizer and food costs - who knows, we might even do a follow-up piece to this too.


This is a web version of FoodHack's 'This Week In Food' newsletter. Sign up here to receive the next edition to your inbox.

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