Easier for Canada to Produce More Fertilizer than Food: RBC

Canada will not be able to fill the global food supply gap caused by the war in Ukraine, but it can help ensure the current situation is not made worse, according to RBC Economics. 

In a paper released Wednesday, author Ben Richardson discounted the idea of Canadian farmers markedly increasing grain production to offset the losses in Ukraine, noting the high cost of expansion and the fact additional land in this country cannot be easily converted to agricultural production due to climate and terrain.  

But as a global fertilizer powerhouse, Canada can help sustain crop yields in other countries, Richardson said, noting this country can increase potash fertilizer production in the near term - even if expanding nitrogen fertilizer production will require more time and investment. 

Canada is already a top player in the global fertilizer market, Richardson said, accounting for 40% of global potash exports. It is also the world’s largest producer of potash and is the 14th largest exporter of nitrogen fertilizers. 

Russia, Ukraine, and Belarus account for nearly 15% of global nitrogenous fertilizer exports. However, the combined impact of the war and sanctions levied against both Russia and Belarus have cut off much of that supply, Richardson said. Meanwhile, amid rising scarcity, other major supplier countries, including China, have imposed export restrictions on fertilizer to protect domestic production. In all, roughly 20% of nitrogen and potash fertilizer exports have been disrupted, he said. 

“Canada’s fertilizer industry still has room to grow and could play an important role in alleviating that global shortage,” Richardson wrote. “What’s more, 85 to 90% of Eastern Canada’s nitrogen fertilizer comes from Russia. This suggests an opportunity to increase self-sufficiency in this region.” 

In Saskatchewan, the No. 1 potash producer in the world, Richardson said major domestic and international fertilizer producers have already made investment commitments with the aim of increasing production in the near-term and expanding capacity and efficiency in the longer term.  In fact, over the last 15 years, the potash industry has committed approximately $30 billion of investment for new mines and expansions. 

But Richardson admitted ramping up production of nitrogenous fertilizers is more difficult. Canadian nitrogen facilities are running at full capacity. And while expanding potash production doesn’t necessarily require new facilities, the investment needed to increase production of nitrogenous fertilizers would be “significant.” It requires the construction of new manufacturing plants, which could take a year or more to complete, he said. 

Richardson also noted the delicate balance between maintaining agricultural productivity, increasing fertilizer production, and achieving Canada’s emission targets. 

“Canada has the ability to expand its role as an outsized player in the global fertilizer market, but it will require a coordinated evaluation of the impacts—and significant effort from government, farmers, and other stakeholders,” Richardson said. 

Source: DePutter Publishing Ltd.

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