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Rising energy costs drive fertiliser prices up because modern fertiliser production is fundamentally an energy-intensive industrial process. The link is direct, mechanical, and unavoidable: energy is both a feedstock and a fuel.
For nitrogen fertilisers (i.e., urea, ammonium nitrate, and ammonia), natural gas is the single biggest input cost, used as a feedstock in the Haber–Bosch process to make ammonia and as a fuel to run high‑temperature, high‑pressure reactors.
When gas prices spike, ammonia prices spike, and the entire nitrogen fertiliser chain becomes more expensive.
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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.