Trade and Finance as Cross-Cutting Issues in the Global Phosphate and Fertilizer Market

Abstract

This chapter provides an overview of trade and finance issues in the global phosphate and fertilizer market. First, we analyze global trade dynamics affecting fertilizers and their raw materials. Secondly, we present factors that influence fertilizer prices. Based on these analyses, we infer that prices for raw materials, energy and transport costs, supply and demand, subsidies, trade and finance, the supply chain, regional influences, the food price, and fertilizer substitutes all influence fertilizer prices. Our analyses also show that, since 2007, the volatility of commodities significantly increased and strongly affected fertilizer purchases for crop production. Finally, we propose case studies to analyze challenges and opportunities related to phosphate and fertilizer markets and their sustainability implications.

Appendices

Appendix: Spotlight 10

Phosphorus and Food Security from a Greenpeace and Indian Smallholder Farmer View

• Reyes Tirado &
• Vijoo Krishnan 

1. Greenpeace Research Laboratories, University of Exeter, Exeter, EX4 4RN 01392 247920, UK

   Reyes Tirado

2. All India Kisan Sabha (AIKS), 4 Ashoka Road, New Delhi, 110001, India

   Vijoo Krishnan

Phosphorus is an essential element for all living things, needed (in the form of phosphate, PO₄) in cells for construction and renewal of DNA and RNA, of phospholipids, and of energy transduction molecules such as ATP. In vertebrates, PO₄ is a main component of the mineral apatite in bones. Thus, human health depends on an adequate dietary supply of P (Dietary Reference Intake (USA): 580 mg for an adult, 1,055 mg for children and youth). The body tightly regulates P homeostasis, primarily by modulating PO₄ excretion in the kidney, closely in concert with calcium (Ca) due to their joint role in bone formation.

Mining Phosphorus, at What Price?

The only industrial source of phosphorus, apart from recycling organic forms of it, currently comes from mines in a handful of countries. Mined phosphorus is by far the main source of phosphate fertilizer used worldwide. Vulnerability to trade speculation, influence of fossil fuel price volatility and increasing demand in emerging economies: all these factors put pressure on mineral phosphorus prices. In 2008, international PR prices increased by 800 %. International prices went down quickly, but never to the pre-peak values: prices are now in 2012 about four times higher than they were before 2006. This volatility makes phosphate import-dependent countries, and low-income farmers more vulnerable and financially insecure. Affordable and sustainable phosphate access is an imperative to ensure food security of nations and livelihood security of the small and marginal farmers.

Phosphate Rock Environmental Hazards

Some PRs contain low levels of radionuclides, including uranium. When these PRs are processed for eventual conversion to phosphate fertilizers, a majority of the radionuclides and other contaminants are concentrated in the phosphogypsum by-product. The resulting phosphogypsum stockpiles present a serious environmental problem, with potential local hazard for human health and pollution of the groundwater. In addition, some phosphate fertilisers contain small amounts of the heavy metal cadmium. Because cadmium is highly toxic to humans, there are concerns about its accumulation in agriculture soils and transfer through the food chain.

A Very Leaky Phosphorus Flow

On a worldwide scale, we are mining five times the amount of phosphorus that humans are consuming in food. Overall, if we simply relate human intake to the agroinputs, about 90 % of the P entering the system is lost into the environment. For example in agriculture, only between 15 and 30 % of the applied P fertilizer in farmlands is actually taken up by annually harvested crops with the rest remaining in the soil. If soil erosion is an issue, the phosphorus lost ends up in water systems causing widespread pollution in lakes, rivers and coastal areas, algal blooms and dead zones in the oceans (together with nitrogen). Thus, ironically phosphorus represents both a scarce non-renewable resource for living beings and a pollutant for living systems.

Phosphorus Applied to Soils Ends up in Water

As noted above, when phosphorus fertilisers are applied, only a small proportion of it is immediately available to plants, the rest is stored in soils in varying degree of availability. It is common for commercial farmers to apply phosphorus as well as other nutrients in excess so not to limit yield or in the case of phosphorus to try to compensate for a specific soil condition such as cool temperatures. However, this increases the risk of significant phosphorus losses if run-off, leaching or soil erosion events occur with excess P ending up in lakes, rivers and oceans. This results in financial losses for the farmer and environmental damage to the soil and surface waters. Ameliorative measures need to be developed to rectify this anomaly.

Too much of a Good Thing

Excess nutrients in water systems, eutrophication, is a major and common problem worldwide driven mostly by overuse of phosphorus and nitrogen fertilisers. Excess phosphorus and nitrogen are causing widespread damage to the Earth systems, especially water systems.

Global studies of phosphorus imbalances found that phosphorus deficits covered 29 % of the global cropland area, while 71 % of the area had overall phosphorus surpluses (MacDonald et al. 2011). On average, developing countries had phosphorus deficits during the mid twentieth century, but current phosphorus fertiliser use may be contributing to soil phosphorus accumulation in some rapidly developing areas, like China, together with relatively low phosphorus use efficiency. Even the idea of most African soils being phosphorus depleted is contested by new analysis; there are vast areas where phosphorus excesses are more common although inefficiently used for food production (MacDonald et al. 2011).

Solutions for a Broken Phosphorus Cycle

Ensuring phosphorus remains available for food production by future generations and preventing pollution of water systems is possible by working towards restoring the phosphorus cycle. This requires strong actions in two main areas: reducing phosphorus losses, especially from agricultural lands, and increasing phosphorus recovery and reuse to agricultural lands from all sources, including livestock wastes, food waste and human excreta. Closing the broken phosphorus cycle should follow two main drivers:

• 1. Stop or minimise losses, by increasing efficiency in the use of phosphorus, mostly on arable land and the food chain. Additionally, sustainable phosphorus use will benefit from shifting to plant-rich diets that are more efficient users of phosphorus (and other resources) than meat-rich diets, and from minimizing food waste.

• 2. Maximise recovery and reuse of phosphorus, mostly of animal and human excreta, and thus minimise the need for mined phosphorus.

Organic fertilisers, when locally available are generally cheap, and make farming more secure and less vulnerable to the problems of external inputs’ access and price fluctuation, should be promoted as part of an integrated soil fertility management. Natural nutrient cycling and nitrogen fixation can contribute to soil fertility, and at the same time reduce farmers’ expenses on inputs and provide a healthier soil, rich in organic matter, better able to hold water and less prone to erosion. Conscious efforts to improve efficient nutrient use and to encourage judicious use of ecological methods of nutrient fixation must be made.

Evidence shows that farming without synthetic fertilisers can still produce enough food for all. This is especially true if we consider a vision aimed at farming with biodiversity, closing nutrient cycles, recycling nutrients from non-conventional sources (sewage, food waste, etc.) and with more sustainable diets. Many scientists, institutions like FAO, UNEP and farmers associations are documenting remarkable success from ecological farming in achieving high yields and fighting poverty in low-income regions.

Real Holistic Solutions

To bring about real effective change, there is a need for convergence in agriculture, livelihoods, energy and sanitation initiatives, especially in low-income regions where agriculture productivity is low and farmer capital and infrastructure are lacking. We suggest two guiding principles for potential alternatives to future sustainable phosphorus use:

A Holistic Approach to Address Rural Livelihoods and Agriculture Issues

Work in sectorial isolated silos will not produce the much-needed effective changes. A people-centred, multi-institutional and transdisciplinary approach will be required. With regards to phosphorus in rural areas, this might mean integrating energy needs, eco-sanitation and fertilisers for food production in setting goals on initiatives related to phosphorus research.

Research and Funding in Agroecological Systems and Holistic Solutions

For decades, research has been directed to an agriculture model that is intensive in external inputs and aimed at increasing yields in a few staple grains, while often detrimental to the environment (Foley et al. 2011). However, less attention has been placed on research for scaling up low-input local practices and agroecological solutions that improve overall food production, nutrition and livelihoods at the local scale. Many examples exist, what is lacking is the research and development to scale up and adapt these solutions to different local realities (3).

The Global TraPs initiative offers an opportunity to focus research and development on a new holistic model of agriculture centred on people, not agrochemicals or other expensive inputs, which can increase food production where it is most needed, and at the same time help in rural development and protection of the environment (IAASTD 2009; Schutter 2009; Scialabba 2007).

References

• Foley JA, Ramankutty N, Brauman KA, Cassidy ES, Gerber JS, Johnston M, Mueller ND, O’Connell C, Ray DK, West PC, Balzer C, Bennett EM, Carpenter SR, Hill J, Monfreda C, Polasky S, Rockstrom J, Sheehan J, Siebert S, Tilman D, Zaks DPM (2011) Solutions for a cultivated planet. Nature 478:337–342

• IAASTD 2009. International Assessment of Agricultural Science and Technology for Development. Island Press. www.agassessment.org

• MacDonald GK, Bennett EM, Potter PA, Ramankutty N (2011) Agronomic phosphorus imbalances across the world’s croplands. Proc Natl Acad Sci 108:3086–3091

• Schutter OD (2010) Agroecology and the right to food. UN Special Rapporteur on the right to food. http://www.srfood.org/images/stories/pdf/officialreports/20110308_a-hrc-16-49_agroecology_en.pdf

• Scialabba NE-H (2007) Organic agriculture and food security. FAO. ftp.fao.org/paia/organicag/ofs/OFS-2007-5.pdf