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Join on Telegram Rabat – As the global economy goes through a turbulent period marked by a worldwide scramble for fertilizers and their ingredients, Morocco and other key producers could benefit from an OPEC-style alliance to stabilize global prices.
The global market for fertilizers is undergoing severe disruptions, first caused by global supply-chain disruptions due to the COVID-19 pandemic and then worsened by the conflict in Ukraine. With key supplies of inputs and fertilizer itself under threat, governments around the world are scrambling to find new supplies of this important commodity.
Fertilizers are a key element in ensuring global food security, and have led to a vast population increase worldwide that now depend on it to maintain affordable food prices.
The impact of the global fertilizer market on food prices for consumers has become a frontpage issue in recent months, in particular after the start of the conflict between Russia and Ukraine, two key suppliers of both agricultural output such as wheat, and the chemicals required to make fertilizers.
Price volatility
Fertilizers come in a variety of shapes and sizes, often tailored to the specific soil and crop available to farmers. From corporate potato farmers in France to small-scale coffee plantations in Indonesia, everyone needs a regular supply of fertilizers in order to grow their crops.
Some countries have resorted to drastic measures to reduce their reliance on chemical fertilizers in recent years. Sri Lanka is a prime example.
The country decided to opt for an approach that would demand the use of organic fertilizers, yet the measure has brought a myriad of issues, including difficulties sourcing reliable organic material, while local farmers and experts worry about future yields.
Most countries recognize that there is little choice in the matter. Current population levels require chemical fertilizers, and governments are often blamed when fertilizer supplies run dry.
India is a fine example of the political implications of fertilizer shortages. The South Asian country’s political scene regularly turns into a circular firing squad whenever farmers complain about fertilizer prices. Local politicians blame the national government, experts blame economists, while local farmers are left bewildered and angry.
Amid fluctuating prices, COVID-19 disruptions and concerns over Eastern European supplies, the fertilizer market is set to continue to see rising prices, likely for years to come.
Essential resource
While our global economic system generally prefers to depend on the free market to correct prices based on supply and demand, the importance of a stable fertilizer supply leads many countries to introduce vast domestic subsidy-schemes in order to keep fertilizers affordable.
The vital importance of fertilizers to people around the world could lead to calls to find a more structural solution to market volatility. Just as with the most traded commodity on earth, oil, fertilizer supplies are essential to keep our modern world going.
Based on this primary need, fertilizer-producing countries like Morocco could be facing a unique opportunity, where the global importance of their industry is recognized like no time before.
These countries could take inspiration from the Organization of the Petroleum Exporting Countries (OPEC) and the stabilizing impact it has had on global oil markets. This alliance of oil-producing countries is able to control global oil prices by using its vast spare capacity to either increase or decrease production.
While OPEC remains controversial in times of high oil prices, few experts would discount the stabilizing effect the intergovernmental organization has had on global markets. While commentators might lament when the organization chooses not to use its power, few other resources have the available option to swiftly change the balance of supply and demand.
OFEC?
At a time when fertilizer supplies are a genuine threat to global food security, impacting consumers around the world, fertilizer-producing countries could step in to bring a sense of stability to the market.
Similar to the model of OPEC, Morocco and other key producers could band together, and leverage their control over the supply of fertilizers to keep this valuable resource available to farmers around the globe.
Such an organization could help ensure a steady supply of fertilizers, stabilize prices at a sustainable level, and alleviate worries over a supply crunch that could leave millions facing malnutrition or starvation.
Such an organization could negate the current, desperate scramble for fertilizer supplies that has led to countries such as Brazil to skirt sanctions amid a search for potential new suppliers. It could bring together key producers of nitrogen-based fertilizers in the US, China, and India with key phosphate-rich countries such as Morocco.
Morocco in particular could be a potential leader of such a new organization, as it holds over 70% of the world’s phosphate reserves.
OPEC’s stabilizing effects are one reason why its cartel-like practices are generally accepted. Another reason is its unique symbiotic relationship with the US.
With governments around the world currently seeing the importance of their fertilizer supply, and the possible political ramifications of shortages, such a symbiosis between fertilizer producers and consumers could suddenly emerge like never before.
Benefits for Morocco
If Morocco and others chose to step in to bring down fertilizer prices and ensure steady supplies, the effects of a more stable market would benefit a range of stakeholders, from end-consumers to the farmers who produce our food.
Morocco’s vast reserves could guarantee the country a significant role in such an organization due to its unmatched reserves and its geopolitical position between Europe, Africa, and the Arab world.
Morocco’s current focus on sustainability in its New Development Model, as well as its climate commitments, could provide another key benefit: the exchange of agricultural technology and knowledge. Africa in particular has vast arable land, yet often lacks the investment and knowledge to increase yields and incomes for farmers.
A collaborative alliance of key producers of fertilizers and their inputs could help direct much-needed funds toward capacity-building efforts and knowledge exchange, while ensuring farmers and their consumers do not fall victim to market volatility.
Based on the current context of instability and uncertainty, Morocco could leverage its diplomatic and economic resources to work towards a stable future-proof fertilizer market.
With prices at record highs, the current context could provide a unique moment when international needs could overrule potential fears of the future power of such an organization.
