The cost of producing Ammonia has sky rocketed, will this be passed on to food costs?
The cost of producing ammonia, which is the primary source of nitrogen fertilizer, has increased six-fold in the past two years, and nearly all of these increases have occurred since March 2021. Ammonia prices follow natural gas prices because ammonia is produced primarily from hydrogen which is made from natural gas. Nitrogen-based fertilizer is essential for producing major crops such as corn and wheat. In most countries, nitrogen-based fertilizer is used for nearly all farms to increase the crop yield. With this massive increase there is no better time to grow organically. Many farming practices have changed over the last few years in the UK to become less reliant on manufactured nitrogen based fertilizers. It would seem that many other countries are going to have to adopt the same attitude if they are going to keep the cost of food production down. For much of the world the only way that farmers will cope is to pass these costs on with higher food prices which will push world inflation up even higher.
Graph by the U.S. Energy Information Administration, based on data from Bloomberg
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