These days, you never know where the next strategic metric will emerge.  As OODA CEO wrote in the OODA Alamanac 2022:

“In 2022 our national decision-making apparatus will be significantly stressed as the U.S. tries to manage multiple simultaneous crises. A new Covid variant, January 6th investigation, China and Russia regional power projection, supply chain, cyber, and economic issues will create an opportunity for adversaries to push the envelope in hopes that capacity is diminished and distracted. Organizations will have to build decision, crisis, and operational resiliency informed by strategic forecasting.”

OODA Loop contributes to your efforts – signal tracking and sensemaking as part of your strategic foresight – essential to building out that organizational resiliency.  This information cumulatively acts as an early warning system that allows for decision-making and action that has an impact on an organization’s ability to change tactics and strategic focus.

Today, the global drought conditions and the food security crisis mounting in Europe will most definitely impact the food supply chain in Europe and Africa), and our strategic signal is fertilizer.  Yes, fertilizer.  More specifically,  how a global fertilizer shortage will impact crop yields, food prices, and scarcity.

Rice, Fertilizer Shortages in Asia, and Government Response

• Soaring fertilizer costs have rice farmers across Asia scaling back their use, a move that threatens harvests of a staple that feeds half of humanity and could lead to a full-blown food crisis if prices aren’t curbed.  From India to Vietnam and the Philippines, prices of crop nutrients crucial to boosting food production have doubled or tripled in the past year alone. Lower fertilizer use may mean a smaller crop. (1)
• The International Rice Research Institute predicts that yields could drop 10% in the next season, translating to a loss of 36 million tons of rice, or the equivalent of feeding 500 million people.(1) (2),
• Nguyen Binh Phong, the owner of a fertilizer and pesticide store in Vietnam’s Kien Giang province, said the cost of a 50-kilogram sack of urea — a form of nitrogen fertilizer — has jumped three-fold over the past year. He said some farmers have slashed fertilizer use by 10% to 20% because of soaring prices, leading to a lower output.  “When the farmers cut fertilizer use, they accept that they will get lower profit,” he said. (1)
• Governments in Asia, where much of the world’s rice is harvested, are keen to avoid this scenario. Keeping prices under control is important for politicians, given rice’s importance as a staple for hundreds of millions of people, especially lower-income groups. Many nations provide fertilizer subsidies to increase yields of improved varieties of cereal crops.
• The fertilizer rally is increasing their fiscal burden. India, which relies heavily on fertilizer imports, is set to spend about $20 billion to shield farmers from higher prices, up from about $14 billion budgeted in February. The South Asian nation is the world’s second-biggest producer of rice and exports to countries like Saudi Arabia, Iran, Nepal, and Bangladesh. (1)

Global Synthetic Fertilizer Ingredient Shortages Are also a Key Driver

• Prices for the ingredients that go into synthetic fertilizers have in some cases tripled since the start of the pandemic. Several compounding problems contribute to the shortage, including the Russian invasion of Ukraine, supply chain issues caused by storms, and high natural gas prices.  Look at the price trend for anhydrous ammonia, a key fertilizer ingredient:

Source:  Iowa State University

• In 2021, Russia was the world’s top exporter of nitrogen fertilizers and the second-largest supplier of both potassic and phosphorous fertilizers, according to the U.N. Food and Agriculture Organization.  (CNBC)
• Costs for the chemical fertilizers that power modern agriculture—nitrogen, phosphorus, and potassium—were already soaring in 2021 for a variety of reasons: a runup in natural gas, the primary feedstock for much of the nitrogen fertilizer produced globally; late summer storms on the U.S. Gulf Coast that temporarily closed plants in the region; government sanctions on a major Belarusian potash producer in response to a journalist’s arrest; and growing resource nationalism on the part of countries such as China, the largest phosphate producer, which began restricting exports last year.  (Bloomberg)
• And that was all before Ukraine was invaded by Russia, a major low-cost exporter of every type of crop nutrient, giving prices a fresh jolt—in North America, one gauge shows they’ve almost doubled from a year ago. (Bloomberg)

Natural Fertilizer (Manure) in Soaring Demand

Farmers worldwide are turning to the natural fertilizer substitute – manure – to grapple with synthetic fertilizer shortages:

• Some livestock and dairy farmers, including those who previously paid to have their animals’ waste removed, have found a fertile side business selling it to grain growers. Equipment firms that make manure spreading equipment known as “honeywagons” are also benefiting.  Not only are more U.S. farmers hunting manure supplies for this spring planting season, but some cattle feeders that sell waste are also sold out through the end of the year, according to industry consultant Allen Kampschnieder. (Reuters)
• “Manure is absolutely a hot commodity,” said Kampschnieder, who works for Nebraska-based Nutrient Advisors. “We’ve got waiting lists.”  To give you an idea of how big the demand is for manure fertilizer today, Iowa usually uses 14 billion gallons of manure a year. This year it may spray 15 billion gallons on fields. That would be enough to cover 108,000 golf courses or fill 280 million bathtubs. It’s a lot of manure.  (Reuters)

Fertilizer Scarcity Impacts Healthy Crop Yields

• James Cox counts himself lucky. The owner of a 687-acre farm in Gloucestershire, a bucolic county in the southwest of England known for its quaint villages and rolling landscape, bought all his fertilizer for the 2022 planting year well before the recent surge in prices—meaning he had enough to feed his wheat and oats, as well as the barley that’s just sprouting. And he doesn’t intend to use it all. (Bloomberg)
• “We are already considering reducing to some extent how much fertilizer we put on this year’s crop so we have some left over for next year,” Cox says, citing soaring prices for synthetic nutrients. He’s trying to calculate exactly how far he can stretch his reserve without compromising the quality and quantity of his harvest. “How much dare we trim the fertilizer back from what we were originally planning to use and how much will that impact the crop margins for this year?” (Bloomberg)

Ukraine Figures Prominently in this Pending Crisis

• Since the war began, fertilizer shipments out of Russia have been severely disrupted, with some domestic producers intentionally holding back supply in response to Western sanctions and many major shipping lines unwilling to touch the product if they could even get it. Shortages in Brazil, the top destination for Russian shipments, as well as in other countries that rely on Russia for supplies, including India and China, could result in smaller harvests and higher crop costs. The Food and Agriculture Organization warned in a report last month that food and feed prices could climb by as much as 22% in the 2022-23 marketing season as a result of the conflict in Ukraine, increasing the risk of malnutrition and even famine.  (Bloomberg)

What Next?

The challenge ahead in the food and agriculture (FA) industry sector brought on by fertilizer shortages and resultant food security crises worldwide have garnered a policy response from the U.S.  Reactions are mixed on how effective the response will be, which include:

• A half-billion dollars in increased farm subsidies. The president’s goal is to encourage U.S. farmers to increase wheat, corn, and soybean production to make up for what Ukraine used to export. Prior to Russia’s invasion, Ukraine produced 10% of the world’s wheat.  But do farmers need that kind of encouragement when commodity prices are already at sky-high levels? (Poynter)
• Under the Biden administration’s proposal, $100 million would go toward providing a $10-per-acre payment to farmers who plant a soybean crop after a winter wheat crop in 2023. Another $400 million would fund a two-year increase in loan rates for U.S. producers to encourage them to grow more select food commodities, including wheat, rice, and oilseeds like soybeans, sunflowers, and canola. (Poynter)
• The Agriculture Department claims the proposal would help stabilize rising U.S. food prices and provide food for foreign countries in need, by helping American farmers grow 50 percent of the wheat normally exported by Ukraine, among other things. That plan, however, would probably also require the U.S. to step up funding for federal aid programs that buy and ship U.S. commodities abroad. Otherwise, wealthier countries like China would likely buy up the extra supply on the open market.  (Poynter)
• New subsidies that would make it easier for farmers to get crop insurance and loans that would, for example, help offset the high fertilizer prices that make planting more acres riskier right now. (White House)

From a foresight strategy perspective, we are concerned with how this food security threat intersects with the already troubling cyber threat vector (which has included multiple large-scale cyber attacks on the U.S. food and agriculture industry sector).  See:

The Cyber Threat Vector as Food and Agriculture Industry Sector Heads into Critical Seasons

Agriculture and Cyber Risk are a New Driving Force and Critical Uncertainty

There are also obvious points of intersection looming global food crisis and How Global “Perpetual Drought” Should Impact Your Foresight Strategy and Strategic Planning. 

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