Further Study: Lots Going on in the Fertilizer Market

Friday, October 21, 2022

By Jim Algie

Tight supply chains and higher production costs following Russia's invasion of Ukraine only add to pre-existing environmental issues associated with the use by Canadian farmers of crop-boosting agricultural fertilizers.

Even before Russian tanks rolled west, Curtis Hiebert had begun looking to eliminate the uncertainty and cost of sourcing anhydrous ammonia for his family's 11,000-acre cash crop operation in southern Manitoba. Hiebert figures he may have found a way in farm-scale ammonia production using electrolysis fuelled by his province's hydro-electricity supply.

Just before seeding this year, Curtis began preparing a site on his farm near Sperling, south of Winnipeg, for an experiment he hopes will solve long-standing problems with timely, anhydrous delivery and soaring costs. He and his wife, Tracey, and Curtis's parents, Lil and Ron, grow grain corn, spring wheat, canola, soybeans, pinto beans and oats.

As it is, the Hieberts derive half their farm's electricity needs from a 200-watt, solar array. Beginning this autumn, they expect to generate home-made fertilizer from the first-ever farm-scale prototype of an anhydrous-from-electricity process from Toronto-based FuelPositive Corporation.

Using proprietary technology developed by Dr. Ibrahim Dincer and colleagues at Ontario Tech University in Oshawa, FuelPositive's plant comes in two 20-foot shipping containers capable of producing as much as 300 kilograms of anhydrous daily at a cost of about $550 per tonne.

FuelPositive picked the Manitoba site because of that province's 98 per cent renewable-energy electricity supply, CEO Ian Clifford tells Better Farming. They chose the Hieberts for the family's field experience with storage and use of anhydrous, the relatively volatile, nitrogen-hydrogen gas (NH3) used widely as a source of nitrogen fertility.

The process relies on renewable electricity to derive hydrogen from water through electrolysis and combines it with atmospheric nitrogen, eliminating much of the carbon pollution generated in traditional natural gas-fired ammonia production. Widespread use of such systems could help clear some of the air over agricultural emissions in general. Hiebert figures home-made anhydrous would also help isolate the farm from increased costs and uncertainty in roiling, petroleum-based, fertilizer markets.

"The point that I want is to decouple away from the oil complex," Hiebert says Better Farming. "Basically, what the fertilizer companies are able to charge, they will charge."

"Even if the production cost is, let's just say it's $200 or $300 a tonne, if they can charge us $2,000 because the price of grain is high, they will. That's the first reason, is price. The second reason is supply," Hiebert says, citing challenges in recent years landing anhydrous at his location, in time to suit crucial tolerances in Manitoba for autumn application.

"Right now the grain prices are super high, so anything goes. But it will come back and we have to be competitive," Hiebert says. He's wary of the prospect of government climate regulations, preferring that farmers "focus on doing the right things in the field."

Once FuelPositive proves the technology, it expects to start marketing farm-scale units widely, Clifford says. There are several similar low-carbon ammonia fertilizer/fuel research projects poised for commercial introduction at the Massachusetts Institute of Technology, Georgia Tech, Stanford University and the University of Minnesota.

Mike Reese heads renewable energy work at the University of Minnesota's Greening of Agriculture Initiative. A ruminant nutritionist by training and part-time farmer, Reese has worked for 20 years researching potential game-changing concepts for farm-scale manufacturing of "green ammonia," making nitrogen fertilizer through water electrolysis using solar- and wind-generated electricity.

Reese describes his project in an interview as "obviously cleaner" and potentially "more economical" than conventional anhydrous production. The Minnesota pilot aims to produce ammonia on a scale to allow farmer co-operatives to make fertilizer and, potentially, fuel to dry grain and power vehicles.

Curtis Hiebert isn't the only North American farmer trying to sort out climate policy while assessing current pressure to feed the world from his own back yard.

Western Canadian Wheat Growers chairman Daryl Fransoo works a fourth-generation family farm near Glaslyn, Sask. with spring and soft wheat crops, malt barley, canola, peas and lentils on about 6,000 acres within 300 miles of Saskatchewan's vast potash deposits.

Although there was no fertilizer shortage this spring in Saskatchewan, price remains an issue, and so does continuing uncertainty about federal policy to curb emissions from fertilizer use, Fransoo says.

The Fransoos acquired this season's fertilizer last autumn at about 40 per cent of prices prevailing by May.

However, they also used less product, mainly because of persistent dry conditions in the region. Their increased reliance on nitrogen-fixing legumes also reduces the need for added fertilizer.

Fransoo emphasizes the role of emerging fertilizer efficiency products, the benefits of Canada's existing 4-Rs, fertilizer conservation programs, as well as no-till soil management and the increasing presence of pulses in western Canadian crop mixes.

"The amount of pulses that we grow in Saskatchewan is another change that's not talked about enough," he says. "It's the fact that you don't have to put synthetic fertilizers down with your pulses and it pulls it (nitrogen) out of the air. This helps to further set us closer to that goal of net zero," Fransoo says.

Even before Russia invaded Ukraine, farm groups in both Canada and the U.S. had called for fertilizer pricing investigations. Both Iowa attorney-general Tom Miller and U.S. Agriculture secretary Tom Vilsack have announced separate investigations.

U.S. Department of Agriculture data shows doubling cost increases since January of 2021 for anhydrous ammonia (plus 315 per cent), urea (plus 214 per cent), potash (plus 213 per cent) and liquid nitrogen (plus 290 per cent).

In Canada, National Farmers Union president Katie Ward, who farms near Ottawa, spoke of the need for a fertilizer pricing investigation during her evidence before a House of Commons agriculture committee study in February. Ward cited "exorbitant prices" and "huge windfall profits" by fertilizer producers.

When it appeared early in the current growing season that Russian sanctions could limit eastern Canadian supplies, Grain Farmers of Ontario chairman Brendan Byrne issued a heart-felt appeal to the fertilizer industry. He wants fair pricing from suppliers and Canadian government relief from tariffs on Russian and Belarusian imports.

Russian fertilizers were not embargoed, but they were "slow to arrive and slow to unload," says Byrne who grows corn, soybeans and wheat on 1,100 acres in Essex County. With fertilizer costs up 100 per cent over last year, 52 per cent of the increase following Russia's terrifying invasion of Ukraine, actual shortages could have curtailed the ability of Canadian farmers to "do our part to feed the world," Byrne says.

As it was, tight supplies in Byrne's home area limited last-minute fertilizer access this spring as farmers adjusted to evolving post-Ukraine markets. The uproar may also have focused attention on longer-term solutions and a Canadian government consultation, which began in March, considering its plan to reduce emissions from agricultural fertilizers by 30 per cent below 2020 levels within 8 years.

Originally scheduled to end in June, the consultation was extended into August. Grain Growers of Canada, among several farm groups seeking more time, announced its own study to "help meet Canada's ambitious goal of net-zero emissions by 2050."

Grain Growers' policy and government relations manager Brandon Leslie handles details of the organization's continuing policy discussions. He emphasizes in an interview the need for practical, scalable solutions to continuing fertilizer supply and regulation issues.

Even so, the industry is open to exploring a variety of concepts both with fertilizers and environment policy generally, he says. They include a role for relatively new "bio-stimulants" and for slow-release nitrogen products that have environmental benefits but add producer costs.

"I think we're going to try to be creative in how we work with government on some of these solutions that will make sense for farmers, that are incentive-based, not regulatory-based, and allow them to test out new things and ultimately achieve that objective of reaching the emissions reduction target," Leslie says.

In 2021, Farmers for Climate Solutions established a 21-person task force to study environmentally beneficial practices.

Their interim report cites 18 tactics to mitigate emissions by 11.6 million tonnes of CO2 equivalent by 2030, mainly through improved management of nitrogen, livestock and soil, and by broadening intercropping and cover crop practices.

"There are lots of examples of farms in Canada that get all of their nitrogen from biological sources," says Farmers for Climate Solutions acting director Brent Preston, an Ontario-based, organic grower of market vegetables. "There are also examples of folks who use clean nitrogen who have been able to substantially reduce the amount that they need … through better placement, better timing and all of the 4-R stuff," Preston says, referring to well-established guidelines for fertilizer efficiencies.

Regarding Canadian fertilizer supplies, there are important differences, east and west. Rail rates inhibit movement of western Canadian fertilizers east when compared with cheaper imports by sea to Atlantic and St. Lawrence River ports, Fertilizer Canada executive director Clyde Graham says in an interview. Even so, spring fertilizer shortages anticipated this year in eastern Canada were largely avoided, he says.

Recent supply pressure is likely to generate incremental expansion of fertilizer production in North America, but "additional, significant production will take … longer," says Graham, whose 70-member organization represents Canada's fertilizer industry.

Among the country's largest suppliers, Nutrien Ltd. has announced plans to increase production both of potash and nitrogen fertilizers in response to "global supply constraints" and to currently-strong agricultural market opportunities they expect will extend well beyond the 2023 growing season.

In early June, Nutrien interim CEO Ken Seitz announced measures to bring annual potash production to 18 million tonnes by 2025, a 40 per cent increase over 2020 levels, citing "potential for multi-year strength in agriculture and crop input market fundamentals."

In May, Nutrien announced preliminary engineering for "the world's largest clean ammonia facility" at an expected cost of $2 billion USD at an existing company site in Giesmar, Louisiana. With full production expected by 2027 and annual production of 1.2 million tonnes of ammonia using "low-cost natural gas," the plant is expected to capture at least 90 per cent of its CO2 emissions and permanently sequester more than 1.8 million tonnes of the greenhouse gases in dedicated geological storage.

"I think fertilizer companies are doing the best they can to increase production wherever that's possible," Fertilizer Canada's Graham says.

"But keep in mind it takes many years to develop new potash or phosphate mining operations or a new nitrogen plant. These are very expensive, multi-billion dollar, multi-year projects." BF