Fears global energy crisis could lead to famine in vulnerable countries

The global energy crisis could escalate into a world food crisis leading to famine in vulnerable countries unless urgent action is taken, one of the world’s biggest producers of fertiliser has warned.

Svein Tore Holsether, the chief executive of Yara, which produces 8.6m tonnes of the key fertiliser ingredient ammonia annually, said high gas costs meant it was curbing production in Europe by 40%.

The Norwegian company, which has production facilities in more than 50 countries including the UK, has been able to maintain supplies of its soil improvement products in Europe by importing ammonia from its facilities elsewhere in the world, where gas prices are cheaper.

However, Holsether warned there was no guarantee that process could continue. “It is important to get the message across that the energy crisis now could be the start of a food crisis,” he said.

“We have to pay special attention to everyone affected by higher utility and food prices, but for some it is a question of living or not. This is about scenarios of famine and food scarcity.”

He added: “The shutdowns we are experiencing across Europe are now having an impact on fertiliser pricing globally. All the main nutrients farmers use are [priced] significantly higher than a year ago partly because of higher demand and increased cost to produce fertiliser. That is having an immediate impact.”

The global price of the fertiliser ingredient urea, for example, is now up to $850 (£615) a tonne from about $260 a year ago.

Julia Meehan, the head of fertilisers for the commodity price agency ICIS, agreed there was “a serious global problem”. She said China was putting in place an export ban on fertiliser, Russia was considering a ban, and Turkey, a large fertiliser exporter, has stopped shipments.

“We are seeing record prices for every fertiliser type, which are all way above the previous highs in 2008. It’s very, very serious. People don’t realise that 50% of the world’s food relies on fertilisers,” Meehan said.

She said crop prices were at record highs and food shortages could be felt in the spring and summer of 2022.

“Farmers are talking about switching their crops from cereals such as wheat and barley, which requires fertiliser containing high levels of nitrogen, to beans and pulses which need none,” she said. “But this isn’t only about grains, it will also impact the crops which are used to feed cattle and other livestock too.”

The National Farmers’ Union warned UK farmers were facing difficulties as a result of fertiliser price rises to triple or quadruple that of last year.

Availability is also at risk because production at one of two key fertiliser facilities in the UK is suspended and the other is only continuing to operate with government financial support.

While the UK usually imports a large amount of fertiliser, the global production issues may make that more expensive and difficult than usual. Tom Bradshaw, the vice-president of the NFU, said: “There is real urgency in this.”

Most farmers in the UK will not require fertiliser until February but he said driver shortages and logistics hold-ups meant there were concerns about whether sufficient deliveries could be made to farms in time.

He said farmers would also be tempted to save money by putting less fertiliser on crops, so reducing yields, adding: “We have high prices for commodities at the moment and normally in response to that farmers produce more but there is a real possibility because of the significant rise in [costs] they will produce less and that will leave the [UK food produce] market short next year.”

Holsether said it was not clear what would happen in the coming months as the energy situation was “very dynamic”. He said the company was negotiating with clients on contracts that would help determine whether it was economical to expand production.

Last year Yara donated 3,000 tonnes of fertiliser to smallholder farmers in Africa in partnership with the UN World Food Programme. Holsether said the company would consider a similar effort again and called on other companies to get onboard.

A WFP spokesperson said: “We’re concerned about anything that could lead to higher food prices that would tip millions more people into hunger. We have worked together with Yara on initiatives such as the Farm to Market Alliance because we are very aware we will never solve the food crisis the world is facing without the private sector.”