Speaker 1: So everything we eat requires fertilizer to grow. Do you
Speaker 1: know what the three main ingredients of fertilizer are. Oh,
Speaker 1: let's see nitrates, nitrates, calcium. That's what most people just say.
Speaker 1: The S word from Bloomberg News and iHeartRadio. It's the
Speaker 1: big take. I'm West Kasova today. How fertilizer became a
Speaker 1: political pawn. We talk a lot on this show about
Speaker 1: how the world being so closely connected means a shock
Speaker 1: in one part of the globe is often felt everywhere else,
Speaker 1: and sometimes in unexpected ways. Today another example of that,
Speaker 1: Russia's invasion of Ukraine caused prices of fertilizer to spike
Speaker 1: in some countries. That means it's become harder to get
Speaker 1: enough to grow critical crops like corn, and even in
Speaker 1: places like the US where crops are plentiful, higher fertilizer
Speaker 1: costs will show up in higher food prices at the supermarket.
Speaker 1: Why did this happen? My colleague Elizabeth Elkin covers this industry,
Speaker 1: and she's here to explain how fertilizer, just like oil,
Speaker 1: gas and semiconductors, has become wrapped up in the geopolitical
Speaker 1: rivalries between East and West Elizabeth. When we think about
Speaker 1: the war in Ukraine, and it's now been a year,
Speaker 1: and so I think we've all been thinking about it
Speaker 1: a lot. Fertilizer is not one of the things that
Speaker 1: comes to the top of most people's minds, and yet
Speaker 1: this is a really big problem that began shortly after
Speaker 1: Russia invade the Ukraine. What happened. Yeah, absolutely, Fertilizer is
Speaker 1: obviously not one of the first things that you think
Speaker 1: about when you think about this war, but it is
Speaker 1: one of the most important things for food security. After
Speaker 1: Russia invaded Ukraine, we saw prices for fertilizer just go
Speaker 1: nuts because Russia is one of the top suppliers of
Speaker 1: these really important nutrients to the entire world. When we
Speaker 1: weren't sure that exports were going to happen, we said, well,
Speaker 1: what do we do. You know, like a fifth of
Speaker 1: the world's fertilizer is in this country that now everybody
Speaker 1: is sanctioning, and we're just totally not sure that anything's
Speaker 1: going to make it out. So where do we make
Speaker 1: up for those nutrients and how do we continue to
Speaker 1: feed people? If fertilizer prices are super expensive, then that
Speaker 1: means that it is way more expensive. Even if you
Speaker 1: can get fertilizer to grow crops, and so then that
Speaker 1: can help push up the price of crops, and so
Speaker 1: all of that plays into your food supply, right. So
Speaker 1: like if it's super expensive to make crops in the US,
Speaker 1: we probably weren't going to see shortages of food, but
Speaker 1: we have seen like astronomical food inflation, and a big
Speaker 1: part of that is fertilizer. And one of the things
Speaker 1: we really did see that I think a lot of
Speaker 1: people notice we're grain prices, wheat in particular, rising because
Speaker 1: exports from Ukraine and other places had been kind of
Speaker 1: curtailed or cut off. But the fertilizer problem is something
Speaker 1: that goes into the years ahead. Yeah, absolutely, And so
Speaker 1: that's one of the things that was really tough at
Speaker 1: the start of this is it's hard to tell how
Speaker 1: much the price and supply of fertilizer is going to
Speaker 1: impact food prices because you apply fertilizer for a crop
Speaker 1: that you won't eat for a long time. If you're
Speaker 1: trying to grow wheat and you don't put down enough fertilizer,
Speaker 1: what happens is you get less wheat. When you're going
Speaker 1: to take that wheat out of the ground and so
Speaker 1: then the levels of nutrients in the soil go down,
Speaker 1: and they can go down for more time than us
Speaker 1: to this season, right, and so then you just end
Speaker 1: up with this whole like sort of supply chain issue
Speaker 1: for you know, it can be I mean a long time.
Speaker 1: So then the next year's yield is lower, and then
Speaker 1: you get into this kind of downward spiral. Yeah, and
Speaker 1: then you have to maybe apply more nutrients than you
Speaker 1: ever would have later. It just depends really on where
Speaker 1: you are, the nutrient content of the soil. It's very
Speaker 1: specific two different crops. It just it's really hard to
Speaker 1: say if I don't apply this fertilizer that I need,
Speaker 1: what's going to happen next year and the next year
Speaker 1: and the next year. It varies depending on who's planting.
Speaker 1: And of course, like every crop now, this is science,
Speaker 1: So your crop is calculated with a certain amount of fertilizer,
Speaker 1: a certain type of fertilizer. And it's not like you
Speaker 1: can just oh, substitute something else, No, definitely not. And
Speaker 1: corn makes corn syrup which goes into like soda and
Speaker 1: everything that we eat, and there's a lot of corn
Speaker 1: syrup in the food that we consume. So corn is
Speaker 1: super super important and you can't skip applying a certain
Speaker 1: type of fertilizer to corn. It's it's called nitrogen. Every
Speaker 1: year you have to apply nitrogen or yield drops dramatically.
Speaker 1: Rebecca chass On, our producer in New York, and Katherine Fink,
Speaker 1: our producer in Washington, went out to ask people if
Speaker 1: they had any idea what's in the fertilizer used to
Speaker 1: grow the food they eat? Um? Nitrogen? Um, okay, I
Speaker 1: just got nitrogen. Sounds like something not healthy. Oh, I
Speaker 1: have no idea, No, no idea. Too phosphate, it's one
Speaker 1: of them. Um my trite tongue. I know this one.
Speaker 1: I know this all. I used to be a geology manager, Elizabeth.
Speaker 1: As you heard there, people me included don't really have
Speaker 1: an idea of what's in fertilizer. You mentioned nitrogen. One
Speaker 1: guy in the clip got that right, But we tend
Speaker 1: to think about it as something in a bag you
Speaker 1: pour over the dirt and who knows what's in it. So,
Speaker 1: what are the main components of commercial fertilizer. Yeah, so
Speaker 1: there's three main nutrients that people put down on the ground,
Speaker 1: and you know there's other stuff that goes on too,
Speaker 1: but these are the big three. It's nitrogen, phosphate, and potash.
Speaker 1: Potash and phosphate are both mined. Nitrogen is created through
Speaker 1: a process called the Haberbosh process. It's synthetic nitrogen fixation,
Speaker 1: which just means that you're taking nitrogen from the air
Speaker 1: and converting it into a form that a plant can use.
Speaker 1: Nitrogen is generally thought of as the most important because
Speaker 1: there are plants like corn that you have to apply
Speaker 1: it every year. It's the one that farmers are not
Speaker 1: going to skip. If they can skip anything, they're going
Speaker 1: to start with potash and then they're going to go
Speaker 1: to phosphate. And then if you see them skipping nitrogen,
Speaker 1: that's when you know that things are really bad. And
Speaker 1: so phosphate and potash as you are, you actually have
Speaker 1: to get it out of the ground, similar to the
Speaker 1: way you would even mind coal. Can you actually describe
Speaker 1: what is it like to mine potash? So I visited
Speaker 1: a mine up in Canada late last year. It's very
Speaker 1: very cold in Saskatchewan. Inside the mine it's actually really hot.
Speaker 1: So you know, I'm because it's so deep, so deep underground, right,
Speaker 1: So I'm wearing like basically a parka with three other
Speaker 1: layers underneath, because if you've ever been to Saskatchewan, Canada
Speaker 1: in early December or late November, it is cold, I
Speaker 1: mean cold. And then you get down in the mine
Speaker 1: and you're in all your protective equipment, you know, so
Speaker 1: that rocks don't fall on you, nothing hurts you. You know,
Speaker 1: you have to sort of like gear up, and I
Speaker 1: am like sweating under all of my layers that I'm
Speaker 1: wearing because I'm in Saskatchewan, Canada. So it's like in
Speaker 1: the eighties degrees fahrenheit down in the mines. Does it
Speaker 1: look like down So it's interesting. I thought there would
Speaker 1: be more like lights and things, So it's actually really
Speaker 1: dark and the only lights come from like your car
Speaker 1: and your headlamp because your car. They drive around little
Speaker 1: cars down there. Because it's so huge, I mean, it's
Speaker 1: like miles and miles underground, and so if you're just
Speaker 1: walking that would take a lot of time and also
Speaker 1: be not so safe to just have people like wandering
Speaker 1: around down there. Right, So they have you go down
Speaker 1: this like huge elevator, which everything that's down in the
Speaker 1: mine had to come down that elevator and be built underground,
Speaker 1: which is super fascinating. So all of the cars, all
Speaker 1: of the equipment, everything came down this elevator and then
Speaker 1: you're down there and you're surrounded by this super old rock.
Speaker 1: There's like a lot of pinks in it. So they're
Speaker 1: pulling up tons of this stuff up. Yeah. Yeah. So
Speaker 1: they've got these huge, like boring machines that cut into
Speaker 1: the wall of the rock. Makes all this noise. You
Speaker 1: wear these head phones and around you like the air
Speaker 1: tastes like salt because there's a high salt content of
Speaker 1: the rock, and so it's like it's almost like being
Speaker 1: in the ocean. You know, it's like a weird sort
Speaker 1: of I mean, I grew up on the beach and
Speaker 1: I was like, oh, this is kind of like being
Speaker 1: back home on the beach. And then it moves on
Speaker 1: these conveyor belts and then they take it up above
Speaker 1: ground and then they process it and so you can
Speaker 1: go into like their facilities where they're storing it, and
Speaker 1: it's like these huge i mean almost like big mountains
Speaker 1: of snow, except it's potash. The thing about potash is
Speaker 1: the top three countries that you mine potash out of
Speaker 1: our Canada and then it's Russia and Belarus. The US
Speaker 1: and Allies had already imposed sanctions on Belarus for other
Speaker 1: things before the war, and so that supply was already constrained.
Speaker 1: And then you get the issues out of Russia, right,
Speaker 1: and then suddenly countries that usually wouldn't go to Canada
Speaker 1: for this stuff like knocking on Canada's door saying, please
Speaker 1: please please think of us when you are mining your potash,
Speaker 1: like we really really really need to secure potash. And
Speaker 1: there was another knock on effect, which is from China,
Speaker 1: but it was kind of the opposite of what was
Speaker 1: happening with Russia. Is that right? Yeah? Absolutely, So China
Speaker 1: has decided to keep a lot of product in country,
Speaker 1: and they're a big producers, and they're a big producer.
Speaker 1: A lot of product comes out of China, and usually
Speaker 1: they're a pretty big exporter, and they have mostly stopped
Speaker 1: exporting a lot of fertilizer. And so at the same
Speaker 1: time as you had question mark will stuff come out
Speaker 1: of Russia and we have seen very little products come
Speaker 1: out of Belarus since sanctions, you also have China saying
Speaker 1: we want to make sure that we have supply in country.
Speaker 1: And the thing about China is it's really really hard
Speaker 1: to tell what their fertilizer stocks look like. We just
Speaker 1: don't have really an eye on the ground on that.
Speaker 1: Even major companies kind of don't know what supplies in
Speaker 1: China look like, and so it's really hard to tell
Speaker 1: at what point they're going to say, Okay, enough, we
Speaker 1: can just start exporting again. We don't think that's happening
Speaker 1: anytime soon. Elizabeth, Please stay with me. We'll keep talking
Speaker 1: after the break. Elizabeth. Before the break, you were talking
Speaker 1: about fears about fertilizer supplies dwindling from Russia and China
Speaker 1: for different reasons, which brings us to another big fertilizer producer,
Speaker 1: the United States, And a lot of what the US
Speaker 1: producers isn't intended for export, is just used to meet
Speaker 1: the huge demands of American agriculture. In the US, we
Speaker 1: have the number one producer of nitrogen fertilizer in the world,
Speaker 1: and they have an able to produce nitrogen fertilizer at
Speaker 1: a much lower cost compared to a lot of the world,
Speaker 1: especially because natural gas is the number one input for
Speaker 1: nitrogen fertilizer. Most nitrogen fertilizer in the world. In Europe,
Speaker 1: we had like a fuel crisis, right. I mean we
Speaker 1: had because of the war, we had prices for natural
Speaker 1: gas exploding in Europe, and so a lot of European
Speaker 1: nitrogen fertilizer producers closed down, and so that has also
Speaker 1: caused supply squeeze. Right. So then you have CF Industries,
Speaker 1: which is the world's biggest producer of nitrogen fertilizer. They're
Speaker 1: in the US and suddenly they can make nitrogen much
Speaker 1: cheaper than almost anywhere else. We've had a pretty good
Speaker 1: go of nitrogen in the US, right, And CF has
Speaker 1: actually started to export more than they did before the war,
Speaker 1: just because they can get good bang for their buck
Speaker 1: if they can get their product abroad, which has been
Speaker 1: an interesting sort of like difference in the US market
Speaker 1: then we saw before the war. So the US hasn't
Speaker 1: suffered as much as some other countries simply because there's
Speaker 1: pretty good supply. Yeah. I mean, we're right next to
Speaker 1: Canada with all of its potash. We've got CF in
Speaker 1: the US, and we've also got Mosaic, which is another
Speaker 1: huge producer in the US, and they do phosphate and potash,
Speaker 1: and so we've had a pretty good supply of fertilizer.
Speaker 1: I mean, prices have still been high because it's a
Speaker 1: global market, so of course prices are high everywhere, but
Speaker 1: the US hasn't really had a shortage problem. Elizabeth, we
Speaker 1: talked about how in countries that produce fertilizer, the US, Canada,
Speaker 1: they've been somewhat isolated from these shocks. But that's not
Speaker 1: true in a lot of the biggest consuming nations of fertilizers,
Speaker 1: especially developing nations that really really need this just for
Speaker 1: basic necessities. Yeah, so it's sort of a classic case
Speaker 1: of halves and have knots here. So you have places
Speaker 1: like the US where we are largely doing okay because
Speaker 1: we you know, we have supply and we already are
Speaker 1: like a pretty wealthy country, right, and then you've got
Speaker 1: places like Africa where they just can't get the product.
Speaker 1: I mean, even those sanctions don't directly impact Russian fertilizer.
Speaker 1: They've been very clear about that, right, sanctions don't extend
Speaker 1: to fertilizers. So Russia is free to export fertiles. Yes,
Speaker 1: Russia's free to export fertilizer in the same way that
Speaker 1: it should be free to export grains. We count that
Speaker 1: as a necessity for food, and so they should be
Speaker 1: free to export this fertilizer, but it has totally gummed
Speaker 1: up the supply chain. So you've got ships unsure if
Speaker 1: they want to touch the fertilizer because they're afraid of
Speaker 1: somehow falling under sanctions. And also product is moving in
Speaker 1: a different way than it used to, and so some
Speaker 1: of those supply chains make it really really difficult. Well,
Speaker 1: one example you write about is Malawi. Yeah, tell us
Speaker 1: about their experience right now. Malawi is already one of
Speaker 1: the poorest places in the world. I mean, they really struggle.
Speaker 1: And then now on top of that, you have i
Speaker 1: mean it's been months trying to get them the supply
Speaker 1: of fertilizer that they need. That is pushing back the
Speaker 1: ability to grow crops because you can't just apply fertilizer
Speaker 1: at any point in the year when they need the fertilizer.
Speaker 1: They need the fertilizer. And that's sort of what Balawi
Speaker 1: is facing right now, is that long term Okay, if
Speaker 1: we can't get our fertilizer, how do we feed these people?
Speaker 1: But it's not just there. You also write that countries
Speaker 1: in other regions of the world are suffering in the
Speaker 1: same way. Yeah, exactly, it's not just African nations. For example,
Speaker 1: go to the other side of the Earth, and then
Speaker 1: you've got Peru, which is actually turning to guano, which
Speaker 1: has been used as a fertilizer in the past. It
Speaker 1: is bird poop. It has been proven to be a
Speaker 1: really good source of nutrients for crops. If they can't
Speaker 1: get the product that they need, guano is a good
Speaker 1: alternative for them. Well, I mean, there's a lot of birds,
Speaker 1: so you can see how they produced a lot of
Speaker 1: guano that I suppose could be collective, but they don't
Speaker 1: do it in all one place, So how do they
Speaker 1: actually collect it? Yeah, so I think that the birds
Speaker 1: like certain areas, and so you just I mean, go
Speaker 1: to where the birds are and you collect the guano
Speaker 1: and then it's used as a fertilizer. And it's not
Speaker 1: just bird guano. They can use bat guano too, So
Speaker 1: there are a lot of different types of guano that
Speaker 1: can be used. That doesn't seem like it's going to
Speaker 1: be a viable solution, No, especially not to feed like
Speaker 1: the massive amount of people on this earth. We'll be
Speaker 1: right back, Elizabeth. Given all the concerns that we're talking
Speaker 1: about that there might not be enough fertilizer to meet demand.
Speaker 1: Are there other fertilizers, other things that can be used
Speaker 1: to make up for the shortfall. You know a lot
Speaker 1: of people talk about manure. It's more difficult to collect
Speaker 1: large quantities of it than it is to just get
Speaker 1: the synthetic nutrients right, And so you have that issue.
Speaker 1: But then you also have the issue of the reason
Speaker 1: why we originally created the haber Bosch process that makes
Speaker 1: nitrogen fertilizers because people were worried about an impending food crisis.
Speaker 1: So if you look back historically, there were people talking
Speaker 1: a lot about how are we going to feed people?
Speaker 1: Population keeps growing, and the manure and guano and all
Speaker 1: of these other things don't create enough nutrients. There's just
Speaker 1: not enough of it. The nutrient content is also not
Speaker 1: high enough to continue to feed the growing population of
Speaker 1: the Earth. And so when they created the way to
Speaker 1: make nitrogen fertilizer, that was considered the most incredible invention
Speaker 1: because it allowed population to continue growing. You can't really
Speaker 1: just say, okay, well we can't get fertilizer, let's get
Speaker 1: cowmanure because it just doesn't work the same way. And
Speaker 1: you know, we talk about composting and stuff like that.
Speaker 1: It's a great way to reduce landfill, you know, but
Speaker 1: it's not a replacement for synthetic fertilizer. Composting is great
Speaker 1: for your kitchen, etc. Like for your little farm or
Speaker 1: your little your little garden, but it doesn't work for
Speaker 1: like a massive grains farm that's trying to produce tons
Speaker 1: and tons of corn to feed the world. So what
Speaker 1: is the solution. How eventually do we correct this problem
Speaker 1: and kind of turn the faucet back on of getting
Speaker 1: fertilizer where it needs to go. A lot of countries
Speaker 1: are trying to increase their in country ability to make
Speaker 1: new fertilizer and make more fertilizer. So you've got grant
Speaker 1: money being thrown at it. You've got countries that are
Speaker 1: trying to make new alliances with other countries, and you've
Speaker 1: got countries that are trying to make different kinds of connections.
Speaker 1: So you have Brazil went to Canada and asked Canada, like,
Speaker 1: can you provide us with more potash? And so you
Speaker 1: get countries that are trying to like build different connections
Speaker 1: in addition to trying to increase the amount of nutrients
Speaker 1: that they can make in country. There are also a
Speaker 1: lot of people that are working on alternatives to synthetic fertilizer.
Speaker 1: I mean, there's a lot of people who are working
Speaker 1: on like microbes, using like other kinds of technology to
Speaker 1: make fertilizer in a different way than it's made now.
Speaker 1: And the hope for that is that it can be
Speaker 1: a little bit more environmentally friendly too, because the way
Speaker 1: that we make fertilizer right now is not environmentally friendly,
Speaker 1: and there's also a lot that gets run off into
Speaker 1: waterways and notions, and you know, giant like algae blooms
Speaker 1: and things like fertilizer contributes to a lot of environmental problems,
Speaker 1: and so the hope also is that you can find
Speaker 1: something that might be little less of an environmental hazard.
Speaker 1: So when you look down the road, is someone who
Speaker 1: writes about fertilizer all the time, what do you see?
Speaker 1: It's gonna be a while before we have anything that
Speaker 1: really really is a major replacement for a lot of product.
Speaker 1: I don't think that anyone who is a professional, like
Speaker 1: in the fertilizer industry thinks that anything will ever totally
Speaker 1: overtake synthetic fertilizer. But a lot of people hope that
Speaker 1: there will be something that can help take some amount
Speaker 1: of that off. And so not only does that help
Speaker 1: contribute to keeping prices low because we won't be so
Speaker 1: dependent on all of these international markets and things, but
Speaker 1: also maybe it'll help solve some of the environmental problems
Speaker 1: that fertilizer causes. Elizabeth Alkin, thanks for coming on the show,
Speaker 1: Thanks for having me, Thanks for listening to us here
Speaker 1: at The Big Take. It's a daily podcast from Bloomberg
Speaker 1: and iHeartRadio. For more shows from my Heart Radio, visit
Speaker 1: the iHeartRadio app, Apple Podcast, or wherever you listen, and
Speaker 1: we'd love to hear from you. Email us questions or
Speaker 1: comments to Big Take at Bloomberg dot net. The supervising
Speaker 1: producer of The Big Take is Vicky Bergolina. Our senior
Speaker 1: producer is Katherine Fink. Our producers are Moe Barrow and
Speaker 1: Michael Flero, with additional production support from Rebecca Chasson. Hilde
Speaker 1: Garcia is our engineer. Our original music was composed by
Speaker 1: Leo Sidrin. I'm West Kasova. We'll be back on Monday
Speaker 1: with another Big Take. Have a great weekend.