Food’s energy threat
Fuel price hikes are threatening to wreak havoc on the food supply chain, paring production and pushing up prices for pandemic-weary consumers. In europe, the energy crisis has spread to the fertiliser industry with the risk of tighter food supplies and even higher prices. In Jamaica, there are genuine concerns that it will ‘fuel’further price increases for farmers.
Much of the concern stems from rising natural gas prices. US natural gas futures climbed to a seven-year high recently as record global gas prices keep demand for US liquefied natural gas (LNG) exports strong. Phillip Paulwell, opposition spokesman on energy, recently told Jamaica’s House of Representatives that the rising cost of fuel means electricity costs will continue to go up in the near future. LNG, he points out, is the base fuel for 60 per cent of Jamaica’s electricity generation. For farmers, natural gas is a key ingredient in urea which is a raw material for fertiliser.
Lenworth Fulton, president of the Jamaica Agricultural Society (JAS), told the Jamaica Observer that he’s concerned. “Some of the elements that go into fertiliser [production], go into energy, [and with rising natural gas prices] it is creating havoc in the whole agriculture sector. Last year this time, I bought a 100-pound bag of fertiliser for about $6,500 to $7,000, right now the price to the farmer is roughly about $10,000. I don’t know if that big jump is from the NewportFersan end or the retailing end,” he added.
Newport-fersan, the country’s sole producer of fertiliser, confirmed the price increase. Hedda Rose Dunkley, business development manager at Newport-fersan, said, “Fertiliser prices have gone up 40 per cent since last August.” She said because the company bulk-buys raw materials months in advance of getting delivery, it did not get impacted by the rising cost of LNG and its impact on the price of fertiliser. The last stock was delivered in August and based on demand, Newport-fersan said it will not be purchasing new raw material stocks until early next year.
“When it comes to restocking in early 2022 [the rising cost of raw material due to higher energy prices] is something we would have on our radar to be watching in the next few months to see how it would impact us locally. Some of the impacts could be higher prices, reduced access to raw materials,” Rose Dunkley said. She told the Business Observer that already, “the price of urea has increased by 100 per cent in the last year alone. Other raw material prices have also gone up by as much as 80 per cent”.
The increase has not escaped the agricuture ministry which has allocated $100 million in support for the purchase of fertiliser by farmers effective October 1, 2021. Audley Shaw, Jamaica’s agriculture minister, told Parliament on September 22, “This should allow for a 15% reduction in the price of four select fertilisers that are commonly used by farmers.” The ministry also said it has held a series of meetings with Newport-fersan to explore new fertiliser blends which utilise less expensive but equally effective ingredients.
However, Fulton pointed out that higher natural gas prices driving an increase in fertiliser prices is not the only energy-related cost affecting farmers.
“The whole energy sector is creating problems,” he said. “Electricity, movement of vehicle, operation of equipment, all of these are energy-based and they are going up. It takes energy to produce the agri-chemicals [used on the farms] and one of the biggest costs facing the producers is the rising cost of energy,” he said exasperatedly. Since the start of the year, pump prices have gone up 34 per cent.
“The freight cost is going up because of fuel costs as well, and what is affecting it is that the major economies like the US and Europe are trying to cut the use of fossil fuels. So in trying to use other green energy, it is pushing the cost up,” Fulton continued. Advanced economies have been pushing the use of biofuels chiefly from corn which, it has been argued, reduces the amount of the crop left for human and animal consumption. Corn is a major ingredient in animal feed. Its price is up 41 per cent in the last year.