Fertilizer Demand: Facing a Future of Decline

Fertilizer Demand

After a period of price volatility, the fertilizer demand is now facing a different set of challenges. A decline in global fertilizer demand will happen faster than now forecast, contrary to more positive demand forecasts that suggest moderate growth. This will be driven, in part, by increasing regulatory pressure on nutrient excess and by new technologies and ag practices that will help improve nutrient use efficiency. Let’s look at the reasons for the fertilizer demand’s potential decline.

• Currently, global excess nutrient volume stands at approximately 52 megatons per year (33 MT Nitrogen, 15 MT Phosphorus, 8 MT Potassium).
• The COP 15 conference established the target to reduce global excess nutrient volume by almost 50%, with the aim of reducing excess by ~29 megatons by 2030.
• This targeted reduction of 29 megatons represents more than 10% of the current global fertilizer market volume.
• Emerging and higher rate of adoption of digital and precision farming, along with leaching inhibitors, biostimulant, and regenerative agriculture, is expected to cause a reduction in potential synthetic fertilizer demand of up to 8% to 12% during the next decade.
• In large Asian markets, nitrogen NUE is currently below 50%, and there is a long way to go to improve practices and thus reduce nitrogen fertilizer use!
• Regulatory effect: The commitment made at the Montreal Biodiversity COP 15 in 2022 to lower excess nutrients by 50% by 2030 represents a significant disruption to the traditional nitrogen-based fertilizer market.
• Technological Disruption: The fast-increasing adoption of precision farming and regenerative agriculture approaches combines positive economic benefits with sustainability benefits, which represents another factor increasing the chances for reductions in synthetic-based fertilizer usage.
• Market Shifts: Fertilizer companies that took the volume route all these years will now need to rely on their potentially flat or declining core business with new value-added products, decarbonization, and altogether new ways to use ammonia.
• Regional Differences: Nutrient use efficiency can differ dramatically across markets. Opportunities globally exist, for example, Asia has much greater potential for increased efficiency, and therefore, much greater demand reductions could potentially take place in that region.
• Business Imperative: Fertilizer companies must start to proactively consider new business models, participate in green fertilizer production, and new fertilizer techniques using non-conventional ammonia as they adapt to the industry evolution to try to secure future growth opportunities.