The ripple effect of high natural gas prices in Europe is constantly emerging.

On the 25th local time, Yara international, one of the world's largest fertilizer producers, said that due to the high

natural gas price, the company would reduce the utilization rate of ammonia production capacity in Europe to

about 35%. Not long ago, another fertilizer giant, the US fertilizer group CF industry, said that it would

temporarily stop the production of synthetic ammonia in Billingham, England. Up to now, many fertilizer

enterprises in Europe such as achema AB, nitrogenmuvek Zrt and grupa azoty have stopped production or

reduced production.

According to the estimation of CRU group, an industry research institution, Europe has lost about half of its

ammonia production capacity and 33% of its nitrogen fertilizer production capacity.

Zhang Linglu, senior analyst of Everbright futures, said in an interview with China business news that in the

fertilizer industry, the negative effects of high natural gas prices and supply shortage in Europe have gradually

emerged. "If this situation continues, it will further affect the global fertilizer production and export, and affect

the major fertilizer importing countries in the southern hemisphere and the upcoming spring crop planting.

Among them, Brazil may become the most affected region in the short term." She said.

European food and beverage supply chain affected

Fertilizer enterprises have pointed the spearhead of reducing production at the high natural gas price. CF

industry also said that the price of natural gas it purchased has more than doubled, reaching a record level, and

it is no longer cost-effective to continue production. The company said that after Russia restricted the supply of

natural gas to Europe, the price of natural gas continued to soar, and the forward price of natural gas indicated

that the price would continue to rise in the coming months.

According to data from the Intercontinental Exchange (ice), as of September 26, the price of the TTF benchmark

Dutch natural gas futures, known as the "wind vane" of European natural gas prices, was 296.510 euros / MWh.

As a crop soil fertilizer, chemical fertilizer is mainly used to improve crop soil fertility. Not only that, in the process

of producing chemical fertilizer (such as synthetic ammonia production), a by-product carbon dioxide will also be

generated. Beer and soft drinks can use carbon dioxide to add bubbles. Meat enterprises use carbon dioxide to

dazzle animals before slaughter. At present, the reduction of carbon dioxide caused by the reduction of fertilizer

production has begun to affect the food and beverage supply chain in Europe.

Carlsberg Polska, Poland's third-largest beer company, said it planned to stop beer production immediately due

to the reduction of carbon dioxide supply.

"Few people realize that carbon dioxide is a by-product of fertilizer production. The problem with carbon dioxide

is that it cannot be stored for a long time. Now we only have a few days of reserves." Carlsberg Polka

spokesperson beata ptaszy ń Ska jedynak) said, "moreover, this situation does not only happen to us. Unless

other brewers have facilities to produce their own carbon dioxide, they will have to stop beer production.

Jedinak also said that in addition to production, the transportation of the food and beverage industry is also

affected, because carbon dioxide is used to produce dry ice and other products, which is crucial for the

preservation of food during transportation and storage.

Nick Allen, head of the UK meat processing association, said that the UK's carbon dioxide supply has become

fragile since the closure of fertilizer plants. "Without an adequate supply of carbon dioxide, more and more

pigs and poultry in the UK will not be able to receive coma treatment." He said.

Allen said that ensuring carbon dioxide supply is the most important strategy at present. "After the latest

developments, we can't understand how the government can stand by and insist that enterprises should solve

the problems themselves. The government will need to intervene." He said.

Or threaten the food supply?

In Zhang Linglu's view, European fertilizer enterprises have reduced production one after another, and a greater

crisis may be in the future. "The global chemical fertilizer export share is concentrated in several countries and

regions. Europe is an important nitrogen fertilizer and phosphate fertilizer export area in the world, and the

export share of Russia and Ukraine has been significantly affected. If the effect of capacity reduction in other

parts of Europe is superimposed, it may affect the global chemical fertilizer export volume. In addition, as the

situation in Ukraine is still unclear, if the supply of chemical fertilizer to the world by Ukraine and Russia is further

restricted, It will bring more variables to the global fertilizer supply. " She said.

According to the data of the US Department of agriculture (USDA), five countries and regions in the world export

about 60% of the world's chemical fertilizers, of which the EU accounts for 13.1% of the global chemical fertilizer

exports, second only to Russia and Canada. Among them, the EU accounted for 11.2%, 16.7% and 8.8% of the

global exports of nitrogen fertilizer, phosphorus fertilizer and potassium fertilizer respectively.

USDA data also shows that as of June this year, Russia imposed export restrictions on nitrogen, phosphorus and

potassium fertilizers, which reduced the global fertilizer supply by nearly 15%.

Zhang Linglu believes that at present, the spring ploughing season in the southern hemisphere is coming. In

addition, Brazil and other countries have always been the world's major fertilizer consumers and importers. At a

time when the quantity of global fertilizer exports has plummeted and the price has soared, Brazil is likely to

become a region that will be greatly affected in a short period of time, which will limit the crop planting area and

output of the country.

According to USDA data, Brazil accounts for about 8.2% of the total global fertilizer consumption, and imported

fertilizer accounts for more than 60% of the total fertilizer consumption in Brazil. Maicon Cossa, vice president of

Brazilian business of Yara international, said at the beginning of this month that Brazilian farmers have postponed

the order of fertilizer this year, and the application amount of fertilizer may decrease.

USDA also stated in the report that in the planting season of 2022, many crop producers had to adjust the fertilizer

application ratio of the fertilizer and the crop varieties to minimize the cost of fertilizer use. Since soybeans have

natural nitrogen fixation capacity and require less fertilizer (nitrogen), some crop producers may increase the planting

area of soybeans. In contrast, they may reduce the area needed to grow corn and other grains.

USDA data shows that for farmers who grow corn and wheat, chemical fertilizer accounts for 36% and 35% of

their operating costs.

Zhang Linglu also said that in the long run, if the situation in Ukraine continues to be stalemate and the global

climate continues to be dry, the natural gas price may continue to soar, which will make the supply of natural gas

based fertilizer continue to tighten. This may further lead to an increase in competition for fertilizer resources

and restrictions on fertilizer exports by various countries, and further frustrate the interests of fertilizer importing

countries.

Recently, representatives of the Brazilian fertilizer industry called on global fertilizer companies operating in

Brazil to increase the output of important local fertilizers. "Brazil is too important as an agricultural producer to

rely on imports of fertilizer." Foreign media quoted the remarks of the main participants.