Nitrogen has been a hot topic, not only in Canada when it comes to emissions reductions, but worldwide as Europe faces steep increases on natural gas prices, which may have crop rotations shifting in the coming years for those producers, creating a domino effect for North American growers.
In Europe, they’ve see a 3600 per cent increase in natural gas, whereas the U.S. has experienced a 400 per cent hike. Neither is well received from the farmer who is having to purchase nitrogen fertilizer; however, Kevin McNew, chief economist with FBN, says these price increases aren’t likely to slow down as we move into the next growing season.
“I don’t think it’s going down anytime soon. We’re in a huge natural grass crisis that is going to translate into higher fertilizer prices for the foreseeable future,” says McNew. “What that means is Europe manufacturers of ammonia, nitrogen based fertilizers – BASF and all the major players – are pulling back substantially on nitrogen fertilizer [production].”
In Canada, there is a fairly deep reserve of natural gas, thanks in large part to fracking practices with oil production, which positions the country to have a larger supply of nitrogen than other parts of the world. McNew says because of the nine-fold price increases in Europe and the reserve of natural gas in Canada, we could start to see a shift in crop rotations, worldwide.
“In the long run, in the next year or so, we’re gonna see a huge reshuffling of crop production around the globe because nitrogen intensive crops are going to be grown in North America. So we’re gonna grow corn, wheat and things like that, that have more nitrogen intensity in these countries, where in Europe, they’re going to be very constrained because of lack of nitrogen, and not being able to grow those crops,” explains McNew.
Although this may point to North American farmers having a larger global marketshare in the coming years, it doesn’t soften the blow of the ever-increasing fertilizer prices being felt today. Nitrogen prices have experienced a lull in the last while but McNew says that’s not overly surprising as we’ve been in the offseason; whereas now, we are starting to see those prices creep back up, a trend that will likely stay on trajectory as we move into spring 2023.
“There’s gonna be more of a push in the coming year for nitrogen and I think that’s going to be seeing higher prices as a result. So my my message to farmers is, I know it’s an ugly price right now. But it’s not going to get any better in the next six months. So be proactive,” says McNew.