Overview

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Modern farming has evolved throughout the years, and a key agricultural innovation historically alongside the adoption of machines has been the fertilizer. Yara's fertilizer products are made to optimize the crop yield, reduce the environmental impact, and improve both crop quality and optimize the nutritional value. Their products are used in over 60 different countries.  

 

Fertilizer is a critical component in agricultural productivity and food production. In general, the fertilizer market is said to be a "supply driven" market when the demand is low, where the price floor is set by the producing region with the highest natural gas prices. 

 

The population growth in the world is estimated to be 83 million annually, which is one of the main drivers of fertilizer consumption growth in addition to economic growth especially in developing countries. 

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With the recent gas crisis in Europe, Yara had to close down 40% - almost two tonnes - of its ammonia production capacity in September in Europe to limit their losses. According to Yara, natural gas constitutes about 90% of ammonia cash production costs, which explains the recent ammonia curtailments in Europe. 

 

The gas crisis has led to a reduction in nitrogen production and thus also the global prices of nitrogen have risen. Natural gas is the major nitrogen cost driver.

 

Outlook

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A key advantage for Yara is that even though the produce less ammonia in Europe, they can outsource ammonia from their other Yara plants outside of Europe, in addition to global trade. The production of ammonia outside of Europe, where raw material prices are cheaper, means that the margin for the sale of the highly demanded nitrogen can be greater. Yara has seen a decrease in deliveries in Europe, but the comparatively higher prices may counteract the lower volumes.