Fertilizer markets and price volatility

G hana does not produce enough inorganic fertilizers to meet the need of its agricultural¹. The country depends on imports of nitrogen, phosphorous and potassium (NPK)². Price volatility has forced domestic companies to import fertilizers in compounds and bulk. Then, they blend the required composites into various formulations. But to meet rising demand, Ghana has plans to build a US$2.00 billion fertilizer plant.

The market

Between 2018 and 2020, Ghana doubled its fertilizer imports, leading to an increase from 315,157 (2018) to 618,638 metric tons in 2020. Between 2020 and 2022, fertilizer prices rose 98 percent on the international market. The increase led to a decline of import by 61 percent during the COVID-19 outbreak. This abrupt decline led to an acute fertilizer shortage in the country. In 2022, Ghana reduced imports again a the Russia-Ukraine war destabilized supply sources.

The price of di-ammonium phosphate (DAP) rose from US$747 per ton in February 2022 and US$938 per ton in March 2022, representing an increase of 26 percent. During the same period, the prices of urea grew from US$744 to US$908 per ton. Muriate of potash (MOP) increased from US$392 to US$563 per ton, recording an increase of 22 percent and 44 percent for the two classes of fertilizers³.

These market developments have destabilized fertilizer supply and led to domestic price hikes. A 25 kg bag of subsidized fertilizer, which cost US$5.15 (GH₵62) in 2021, was worth US$13.29 (GH₵160) in the first quarter of 2022. Ghana spent US$173 million in 2019, US$109 million in 2020, and US$79 million in 2021 on fertilizer import. During the first semester of 2023, the country imported 220,000 metric tons⁴.

Cross border trade distorts the market and price of fertilizers through re-export to neighboring countries. According to the International Fertilizer Development Center (IFDC) In 2020, about 4,696mt of fertilizers were re-exported mostly to Burkina Faso, Togo and Cote d’Ivoire⁵.

Consumption

Consumption measures the quantity of plant nutrients used per unit of arable land. Usage is increasing in rural areas according to the Ministry of Food and Agriculture⁶. It has increased from 8kg per hectare in 2017 to 20kg per hectare in 2020, for smallholders in rural areas. In comparison, the world average in 2020 (based on a sample of 161 countries) is 180.1 kg per hectare of arable land. Ghana ranks fourth in Sub-Saharan Africa behind Seychelles (542.5 kg per hectare), Egypt (473.4) and Mauritius (150.5). Like Ghana, Seychelles, and Mauritius are net importers. But, Egypt has eight fertilizer plants and produces 22.5 million tons per year.

Potential of organic fertilizer

In September 2019, Morocco and Ghana signed an agreement to build a fertilizer plant in Ghana by 2024. The OCP Group (OCP S.A. or Office Chérifien des Phosphates) is the Morrocan contactor. OCP is a state-owned phosphate rock miner, phosphoric acid manufacturer, and fertilizer producer. The plant will use ‟Ghanaian and Moroccan raw materials, that is gas and phosphate”. Ghana targets one million tons per annum, according to Karim Lofti Senhadji of OCP⁷. Ghana and Morocco estimate that the plant will cost US$2 billion.

Ghana also promotes the production of organic fertilizers from solid waste. This waste contains organic elements suitable for organic fertilizer production. They include agricultural waste from cocoa, palm, sugar cane, coffee, and cereal farms. Other agricultural waste come from animal manure. Organic items make up 65 percent of waste generated in Ghana, according to United Nations reports. Ghana rejects over 12,710 tons of solid waste every day, but only collects 10 percent of that waste⁸.

Demand for organic fertilizer is 0.7 million tons per year according to studies. This demand has a potential to rise to 2.7 million tons per year, in the long term⁹. Annual increase in demand will grow to 3.5 percent until 2026. This corresponds to 290,460 metric tons per annum. The same research also suggests that adoption will requires sensitization, availability, and affordability, after establishing a strong relationship between organic fertilizer adoption and farm performance. Yield increased by 57 percent, income by 53 present, and gross margins by 63 percent.

But companies struggle to scale up production to meet demand.

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