Since then, consumption from the region has stabilised and is now growing moderately as Eastern Europe becomes the leader in consumption growth, following its expanding agricultural production. Out to 2021, BMI expects Western Europe to maintain fairly stable demand for fertilizers. Eastern European countries will outperform, with bright spots among Eastern European EU members and Black Sea countries.
Nitrogen fertilizers (including ammonium and urea-based fertilizers) account for 70% of total fertilizer use in the EU, with the rest divided approximately equally between phosphates and potash-based products. Nitrogen products also account for the majority of production and trade within the region. According to Fertilizers Europe, EU countries used 11.1 million t of nitrogen in 2016, compared with 2.5 million t of phosphate and 2.9 million t of potash in the same period. This was applied to 133 million ha., out of a total of 178.9 million ha. of agricultural land in the region. Approximately 62% of fertilizer use in Europe goes towards grains production, with wheat accounting for the lion's share of consumption.
Limited growth in EU fertilizer demand: Eastern Europe to outperform
BMI believes that the growth in demand for fertilizer in the EU will be limited over the next five years, particularly in Western European countries, such as the Netherlands, the UK and France – countries that already have high application rates. Moreover, BMI believes that the EU as a whole will see subdued growth in wheat production through to 2021 due to its assumptions for yields to decline and return to levels more in line with their long-term average, mainly because of less favourable growing conditions. BMI is thus forecasting EU wheat production to essentially remain flat at approximately 152 million t in 2021 compared to 156 million t in 2015.
The elevated share of wheat among EU grain production (approximately 50% on average from 2006 to 2018) supports the view for limited growth in fertilizer consumption among EU countries. However, BMI’s subdued forecasts include corn and barley as well, both of which will show virtually no production growth out to 2021. In this context, Eastern EU member states are expected to outperform their Western counterparts. In particular, Poland and Romania are highlighted as bright spots for growth in fertilizer consumption. Of the 12 European grain producing countries that BMI forecast, Poland and Romania are anticipated to have the two strongest average annual production growth rates at approximately 2.7% aggregate for wheat, corn and barley.
In Poland, consumption growth will mainly come from corn, which will see increased demand from the livestock sector as feed. BMI is relatively optimistic regarding Poland's livestock outlook, as the poultry sector will see increased exports to Asia while red meat production will benefit from increased exports within the EU. In Romania, by contrast, most of the growth is expected to come from the wheat market, which will benefit from strong export opportunities, particularly to the Middle East and North Africa. However, this Eastern European outperformance will be partially offset by changes in the EU's Common Agricultural Policy (CAP), which will affect income growth in developing Europe over the next two to three years.
Outside of the EU, BMI expects Ukraine and Russia to outperform. Much of the growth in fertilizer consumption will be due to base effects, as fertilizer application in the Black Sea region is well below recommended levels, especially for phosphate and potash. Moreover, BMI expects the grains sector to drive fertilizer application growth in both countries, in line with its view for the Black Sea region to strengthen its share of the wheat export market. Finally, farm-gate fertilizer prices are relatively high in the EU compared to other areas of the world, which contributes to the view that the Black Sea region will outperform in the EU in terms of fertilizer demand growth.
This is an article written for World Fertilizer's January/February 2018 issue and abridged for the website. Subscribers can read the full issue by signing in. Non-subscribers can access a preview of the issue here.