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High energy costs will raise the global food price

Nov 26, 2021

The current high prices of energy will probably lead to even further increase of the food price. The risk of disturbances affected by the high price is apparent. Many are aware that high fuel prices directly will affect the farmers, however it is less known that the high gas price can affect the harvests significantly in 2022.

The price of fertilizers has increased by 340% during the months of 2021 (Price in January US dollar 250/tonne, compared to price in October US dollar 850/tonne) due to the high price of energy, which in turn has led to a decrease in the fertilizer production. Fertilizer is a key element for conventional farming and if it is removed, the crops and production will be reduced by approximately 50%.

The high price of fertilizer has led to fertilizer dealers and farmers on the Northern Hemisphere not stocking up on larger quantities of fertilizer for the upcoming spring of 2022, as they have been waiting for the price to fall.

Normally, trade in fertilizers is spread throughout the year and the logistic chain is dimensioned accordingly. There is an imminent risk that in the upcoming spring when farmers are forced to buy fertilizer (regardless of whether the price has dropped or not) there is not enough fertilizer available as the low demand of fertilizers has led to decreased production.

There is therefore also a risk that farmers will not be able to have the fertilizers delivered due to logistics chains not corresponding to an expected peak in spring.

Expensive food will directly affect nations that are highly dependent on food imports, thus increasing the risk of social unrest due to hunger and possible famine. Such a situation occurred during the Arab Spring, where one of the factors behind the protests was the high food prices.