The price of fertiliser is through the roof: here’s why that might be a problem for Latin America
Protests in Iran threaten to spread out of control
Hi there Intriguer. Inflation doesn’t quit. Apple announced that its App Store prices will increase in Europe and Asia starting next month. The Eurozone countries, Sweden, South Korea, Chile, Egypt, Malaysia, Pakistan, Vietnam, and Japan, will all be hit by the 20% price hike, which has been marketed as a way to compensate for weakening currencies worldwide. Sounds like the prompt we needed to cancel those free trials we never actually cancelled.
Today’s briefing is a ~4.7 min read:
- 🚜 Food politics: Why Latin American countries need better fertiliser strategies.
- ➕ Plus: Protests in Iran, the UAE and Turkey bond over drones, and Equatorial Guinea abolishes the death sentence.
📰 GLOBAL HEADLINES
Stories: Helsingin Sanomat, Kayhan, The Phnom Penh Post, Perfil, Africa News
🤿 DEEP DIVE
Talking s**t: Latin America’s fertiliser crunch
In brief:
- The price of fertilisers has skyrocketed since 2020, thanks partly to the double-whammy of the Covid-19 pandemic and the Russo-Ukraine War.
- High fertiliser prices are a serious concern for Latin American countries because they rely disproportionately on imported petrochemicals to fuel their economies.
A song of gas and fertiliser
If Europe is going to spend this winter hammering out its future energy strategy, then Latin America might also take the chance to reflect on its fertiliser supply chain resiliency.
- According to a recent report by financial company Corficolombiana, Latin American countries only produce 16% of their fertiliser needs (on average), forcing them to rely heavily on imports.
That’s a concerning statistic for a region forecasted to contribute 18% of global food exports by 2031, especially considering the dizzying prices of agrochemicals at the moment.
- For example, the price of urea ammonium nitrate, a popular fertiliser, has more than quadrupled since the beginning of 2020.
If that trend persists, Latin American governments will need robust contingency plans or risk facing food shortages and discontent from broad sections of society.
Fertiliser prices move with oil and gas
The process of refining chemical fertilisers requires a great deal of energy. In the case of nitrogen, it requires a lot of natural gas. As a result, fertiliser prices end up tracking oil and gas prices reasonably closely.
- Between a global pandemic and a war in Europe, energy prices have been on a wild ride over the past two years, which explains the extreme volatility that has hit the fertiliser sector too.
The industry has been hurt by Western sanctions on Russia and Belarus, both of which are vital fertiliser-producing countries. In addition, the soaring price of fertiliser has prompted countries like China to impose fertiliser export controls to protect their domestic food supply.
Why we’re telling you
Just as gas and energy considerations are animating much of Europe’s current politics, fertiliser prices could become the next hot issue in Latin American foreign and domestic policy.
For example:
🇧🇷 In Brazil, the price of fertiliser could be a deciding issue in next month’s presidential election.
- President Jair Bolsonaro is already wooing the agricultural vote by promising to boost Brazil’s fertiliser supply by mining the Amazon Rainforest’s potash reserves.
🇻🇪 In Venezuela and 🇨🇴 Colombia: the two countries’ recent reconciliation is partly motivated by Venezuela’s need to secure more fertiliser supplies.
- Just this week, a fertiliser plant in Colombia owned by a Venezuelan state-owned company was returned to Venezuelan President Maduro’s control after Colombia’s previous administration had allowed opposition leader Juan Guaidó to control it since 2019.
The bottom line:
“There is no quick solution to increasing the supply in the region. Demand is not going away. In the short term (the rest of this year), headlines about fertilizer will continue driving politics”.
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🔦 REGIONAL SPOTLIGHT
Africa & the Middle East
🇬🇶 Equatorial Guinea
Equatorial Guinea, one of the most autocratic countries in the world, abolished the death penalty earlier this week.
- In doing so, it becomes the fourth African country to abolish the death penalty in two years.
- The country still has a long way to go regarding respecting human rights, but small steps in the right direction are a cause for optimism.
🇬🇭 Ghana
According to a senior director from ratings agency Fitch, Ghana may be inching closer to a default.
- Ghanian authorities are in talks with the IMF to secure financial help for the country’s ailing economy.
- Like many other countries, Ghana has been struggling to contain rampant inflation and revalue the Ghanaian cedi without taking on more unsustainable debt.
🇳🇬 Nigeria
Nigeria and Morocco signed a Memorandum of Understanding to build an off-shore gas pipeline linking Nigeria to Morocco, from where it will be connected to the European gas network.
- The pipeline is expected to span 6,000 km and link 13 countries along the West African coast.
- The Russo-Ukraine War and Europe’s energy crisis have injected new momentum into a swathe of long-planned but never-delivered energy infrastructure projects.
🇸🇦 Saudi Arabia
Successful negotiation efforts by Saudi Arabia and Turkey have facilitated a significant prisoner swap between Russia and Ukraine involving ~300 people.
- According to a Saudi official, Crown Prince Mohammed bin Salman was personally involved in the release of ten foreign fighters from Russian detention.
- Gulf states like Saudi Arabia and Qatar are increasingly taking on the role of mediator in significant conflicts, perhaps because they see it as an intelligent way to avoid being dragged into ‘great power’ confrontations.
🇹🇷 Turkey
Forget flowers; a real government prefers drones. Turkish weapons manufacturer Baykar Defense (maker of the infamous Bayraktar TB2 drone) sold 20 armed drones to the UAE this month, a sign that the rift between the two regional rivals is on the mend.
- Turkish drones are in high demand nowadays; they’ve been battle-tested in Ukraine and Libya, are cheaper than US weapons, and are under far fewer export restrictions than their competitors.
- Turkish President Recep Tayyip Erdoğan has sought closer relations with rich Gulf states, enticed partly by the prospect of more foreign investment flowing into Turkey.
🗞 IN OTHER NEWS…
Protests spread in Iran
The news: At least 17 people have died in protests across Iran.
- The protests were triggered by the death of Mahsa Amini, a young woman who was allegedly killed by Iranian authorities (aka the ‘morality police’) after she was arrested for improperly wearing a hijab.
- Women are leading many of the demonstrations, with some cutting their hair and burning headscarves (which are compulsory under Iranian law) in an act of resistance.
Why it matters: Protests have already broken out in more than 50 cities across the country, and the authorities are worried that they could spread even further.
- The Iranian Revolutionary Guards have warned citizens against spreading “false news and rumours”, which suggests the government considers the demonstrations a threat to its stability.
The response: Authorities have resorted to the trusty ‘deny, deflect, accuse’ strategy, denying that Amini died as a result of police violence while accusing “armed gangs” for the death of several civilians.
- Iranian authorities have also implemented a series of internet shutdowns as severe as those enacted during the 2019 protests to quell the protests.
- Adding to the sense that the Iranian government is rattled, President Raisi did not show up for a planned interview with well-known CNN journalist Christiane Amanpour in New York yesterday because she refused to wear a headscarf during the interview.
Ironman to the rescue? Elon Musk has said he will ask the US government for special dispensation to send his Starlink services to the country, allowing users to bypass government restrictions on the Internet.
- Musk sent Starlink terminals to Ukraine to help them avoid Russian military jamming systems earlier this year. One imagines Musk is starting to get on the nerves of repressive regimes everywhere, to whom we say: welcome to the club.
🥳 FRIDAY FUN
Where are we?
You can probably tell which country this is, but do you know which city? Here are three clues:
- This city was its country’s capital from 794 to 1869, a remarkable 1,075 years!
- It is home to a world-famous bamboo forest, as well as fourteen temples and castles that were collectively given UNESCO World Heritage status in 1994.
- The city is a six-and-a-half hour drive from the capital, or just over two hours on one of the country’s famous bullet trains.
Answer: Kyoto, Japan (35.028, 135.798)