Nitrogen Fertiliser Demand: Growth Is Not a Given

Global food production needs to double by 2050 in order to feed the growing population. However, as the amount of farmable land cannot increase much, the future for fertiliser demand seems bright. Yet it’s not quite that simple: we expect nitrogen fertiliser demand to decline in the US, Europe and potentially also in China. In other parts of the world, we expect demand to grow at different speeds.

Fertiliser efficiency varies hugely around the world, due to big differences in natural environment (climate, water availability and soil quality) and the fact that the agricultural sectors of various countries are in different stages of development. As a result, an increase in productivity does not by default mean an increase in the fertiliser application rate. To illustrate: nitrogen fertiliser application rates are similar for countries like France, Germany, the US, Canada, Indonesia and India, while yields vary strongly between these countries (see Figure 1).

Figure 1: Nitrogen fertiliser application rates vs. average yields in various countries in 2011

What’s behind this discrepancy is that these countries’ agricultural sectors are in various stages of development. We should distinguish between two agricultural models—the land-scarce model and the land-abundant model—because countries in each model develop along a different trajectory (see Figure 2). 

The land-scarce model

In this model, land is scarce and therefore expensive. Farms are small, and economic forces tend to push towards a high input use per hectare in order to maximise yield and revenue per hectare. If governments do not intervene, inputs use becomes unsustainably high—as seen in the Netherlands and neighbouring countries, but also in China and some other Asian countries. Therefore, at a certain point, governments will intervene, and farmers start to switch from yield maximisation to input optimisation. History shows that, in this situation, yields continue to increase, while fertiliser application rates are lowered. Increasing fertiliser efficiency is the key solution. 

The land-abundant model

In this model, land is relatively abundant and cheap. Inputs use is lower because inputs are relatively expensive compared to land. Inputs use increases only slowly, in line with yield increases or even slower than yield increases, as inputs efficiency also increases.

Figure 2: Development of fertiliser application rates over time in various countries, snapshot of today’s situation

If we apply the growth trajectory from Figure 2 to the global fertiliser market, we reach the following conclusions (see also Figure 3):

  • Fertiliser demand in North America and the EU can be expected to remain stable or decline as fertiliser efficiency increases. The development of data-enabled smart farming technologies may strengthen this downward trend.
  • China, the largest global market, will most likely see a stabilisation of demand. Depending on how aggressive the Chinese government interferes, demand may even decline. It is becoming clear that application rates are unsustainably high on some occasions, and the Chinese government has vowed to stabilise fertiliser application.
  • In the rest of the world, fertiliser demand can be expected to increase, due to a trend of intensification in agriculture. This trend will be bigger in countries with a land-scarce agricultural model (such as India and the rest of Asia) and somewhat smaller in countries with a land-abundant agricultural model (such as Russia and Brazil). In Brazil, however, land expansion is also a driver of fertiliser demand.

Figure 3: The global fertiliser market (2014) and dynamics for the next five to ten years

Finally, it is worth nothing that other factors also play an important role in fertiliser demand, such as farmer margins, government policies and subsidies, as well as regional differences in soil productivity, climate and water availability. Application rates will never be equal around the world because nutrient application will always be tailored to expected yield given local circumstances.

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