Europe s energy crisis is spreading to the fertilizer industry, threatening to tighten food supplies and push prices even higher.
The American fertilizer maker Yara International ASA said at the beginning of Friday that record-high prices hurt its production and will have cut about 40% of its European ammonia production capacity by next week. That comes after another producer, CF Industries Holdings Inc. announced on Wednesday that it is halting two plants in the U.K. due to rising energy costs.
Fertilizer prices jumped in the past year after a crop rally helped farmers boost purchases of the nutrients and have been further supported after Hurricane Ida struck the heart of the U.S. fertilizer industry and hurricane Nicholas threatened more damage in the Gulf of Mexico. Higher costs of the key farming input risk further exacerbating global food inflation at a time when hunger is on the rise.
A United Nations measure of food prices is already the highest in a decade near market. Costs jumped as extreme weather hurt crop prospects, the pandemic affected supply chains and shipping costs rose. That s increase inflation risks for central banks and consumers, especially those in poorer nations dependent on imports.
Yara trades about one-third of the world's ammonia, which is available in fertilizers but also used in industries such as automotive, textile, healthcare and cosmetics. The company, which said it will reduce output at a number of plants, produces ammonia in Europe at plants in the Netherlands, Germany, Norway, Italy, France, U.K. and Belgium.
A global gas shortage has more than tripled European prices this year raising fears of a long-lasting impact on inflation and painful pain for the wider industry ramping up after the pandemic. Some of the region s industrial giants, including BASF SE, are alerting of the impact of the jump in electricity prices.