EU explores fertiliser stockpiling as supply risks raise food price concerns

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EU fertiliser stockpiling plans

Highlights

European Commission proposes fertiliser stockpiling, joint procurement, and advance payments to farm recipients to address rising crop nutrient prices and supply risks.
Nitrogen-based fertiliser prices remain about 70 percent above 2024 averages, driven by higher gas costs and heightened geopolitical risks near the Strait of Hormuz.
EU officials anticipate delayed upward pressure on food prices later in 2024 as farmers deplete fertiliser stocks purchased before the Iran war-related supply disruptions.

Commission plan targets supply security

As reported by Financial Times, the European Commission is assessing preparedness options for key fertilisers, including seasonal or minimum stock requirements for member states and possible joint procurement of fertilisers and their components. The proposals form part of a package unveiled on Tuesday to address elevated crop nutrient prices and strengthen supply security across the bloc.

Commissioner for agriculture Christophe Hansen says food security starts with fertiliser security and that Europe must produce more while depending less on external suppliers for agricultural nutrients. The Commission also plans legislation to amend the Common Agricultural Policy so beneficiaries of farm funding can receive advance payments to offset additional fertiliser costs.

The package also includes efforts to build lead markets for organic and low-carbon fertilisers made in Europe, including possible requirements for low-carbon fertilisers in blended products to support demand. Officials are also considering technical changes such as allowing wider use of digestate from biogas production, although its application is currently constrained by its high nitrogen content.

Farm cost pressures and inflation risks

Before the war, as much as one-third of globally traded fertilisers moved through the Strait of Hormuz, leaving supply chains vulnerable to disruption from the U.S.-Israeli war against Iran. Nitrogen-based fertiliser prices last month were about 70 per cent above their 2024 average, with gas accounting for as much as 80 per cent of production costs.

EU officials say they do not expect an immediate knock-on effect on food prices, but they warn the impact could filter through later in the year as farmers use up fertiliser bought before the Iran war. The issue is especially acute for arable farmers, and sustained price increases risk adding pressure to food producers, consumers, public budgets and political leaders.

Speaking before the announcement, Copa Cogeca president Lennart Nilsson says the energy crisis underlines the importance of a strong and stable Common Agricultural Policy as talks continue over the EU's next joint budget. The fastest relief may come from temporarily looser state aid rules already proposed by the Commission, though that could produce uneven support across the bloc, while environmental rules such as the EU emissions trading system and carbon border adjustment mechanism remain in place for fertilisers.

Our earlier report on the European Commission’s draft fertiliser action plan explained that Brussels was weighing emergency support via the Common Agricultural Policy alongside longer-term options such as strategic stockpiling. It also highlighted how disruption risk through the Strait of Hormuz and higher gas costs were driving fertiliser prices up, raising concerns about uneven state-aid support and potential food inflation later on.

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