Sustainable Fertilizers: Micronutrients, Biofertilizer, Green Ammonia
Contents
Introduction
Farmland per person
Market forces
Facts and Figures
Impact
How bad is the current solution?
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Final Thoughts
Stipulations to widespread adoption
Keeping our Farms Green
Pathways to optimizing our land sustainably
Imagine walking into a grocery store and the aisles of shelves lay barren as food production falters. Food insecurity is tethered to global population growth and is at the forefront of threatening human survival. The global population is growing at a rate of 0.9% per year, meaning more mouths to feed and a higher demand for food. Yet, due to a decrease in arable land, the world’s ability to sustainably harvest and supply food for a growing population is declining. A solution that has presented itself involves adding nutrients to soil to increase its productivity, such as fertilizers. This process can help alleviate stress on the food market.
Over the past 20 years, cropland area per person has either decreased or stayed stagnant, even though 9.9% of the global population suffered from hunger in 2020, up from 2015 and 2019. Increasing food demand combined with a diminishing supply of land provide a number of opportunities for advanced sustainable fertilizer technology.
Market Trends: Facts, Figures, Forces
Market Forces
Government support for agriculture and high crop prices during 2020 and 2021 led to an increased global demand for fertilizer nutrients. However, the International Fertilizer Association expects demand to decrease by 3% in 2022 due to predicted global fertilizer price increases. Several factors are contributing to price increases, including the rise in natural gas prices during 2021, China limiting fertilizer exports expected to extend to mid-2023, and the restrictions on Russian imports and exports, including fertilizer, in response to Russia’s invasion of Ukraine.
Market Facts & Figures
• In 2020, the global fertilizer sector was valued at $171.76 billion
• Between 2022 and 2030 the global fertilizer market is expected to grow at a CAGR of 3.55%
• Russia and China are the largest exporters of agricultural fertilizers globally
• As of 2021, East Asia and South Asia had the highest fertilizer consumption of any region
• Asia’s share of global nitrogen demand for fertilizers has consistently been larger than any other region (2016-2022)
Top(soil) Heavy
Russia, China, and Canada export as much fertilizer as the next nine top exporting countries combined.
Source: Statista
Investment Opportunities
The current state of the fertilizer market is looking unfavorable for investment opportunities. Increasing fertilizer prices, a volatile geopolitical landscape, supply chain issues, and export limitations are causing uncertainty in the industry. While current market circumstances make investing in fertilizer risky, there may be a number of investment opportunities surrounding alternative energy products using green ammonia. Green ammonia is the same ammonia that has been used in fertilizers for decades, but it is produced using renewable energy, making it “green”. It has the potential to be used not just as a fertilizer but as a fuel source as well, especially for the shipping industry.
Green ammonia can also bring investment opportunities to emerging markets. As scientists make strides in cleaner ammonia production, remote communities with few options for importing fuel and fertilizer could sustain themselves and power their villages with ammonia that they can make locally. Companies like MAN Energy Solution of Germany and WinGD of Switzerland are currently working on ammonia-fueled engines and kits to help existing engines run on ammonia. Their products are estimated to be operational as early as 2024. Overall, experts predict the market for green ammonia to expand rapidly in the coming years.
Market Segments
Micronutrient Fertilizer
Demand is growing significantly for micronutrient fertilizers. The market value of agricultural micronutrients is expected to reach $8.81 billion in 2022. Micronutrients, including boron, chlorine, copper, iron, manganese, molybdenum, and zinc, are needed to improve plant growth but are usually scarce in crop yields. Boron, for example, promotes healthy cell growth, and iron and manganese act as chlorophyll catalysts. The FAO launched a program called Soils4Nutrition in 2019 with the aim of helping farmers in Malawi, Bangladesh, and Burkina Faso use sustainable soil management practices. This includes helping them improve the micronutrient content of their crops by increasing organic matter in soil, minimizing tillage, and ensuring crop rotation, as well as educating them about how micronutrient content in food is directly related to micronutrient content in soil.
Biofertilizer
Biofertilizers are made up of living microorganisms which help plants grow by increasing their nutrient supplies. Greater awareness of the environmental concerns and health hazards from synthetic fertilizer use will propel the market forward. Compared to traditional fertilizers, biofertilizers provide increased nitrogen and phosphorus, which along with potassium are the most important nutrients for plants. They provide essential health and nutritional benefits, ensure proper energy storage, and increase crop yields. Biofertilizers are able to provide plants with these crucial nutrients in a way that does not damage soil fertility. Biofertilizers also increase soil carbon sequestration and improve soil microbial activities which in turn enhances nutrient uptake. It’s estimated that by 2027 the biofertilizer market will reach a value of $3-4 billion.
Green ammonia
Green ammonia is produced using 100% renewable energy and in a carbon-free process. Traditionally, ammonia is produced by taking hydrogen from natural gas and combining it with nitrogen at very high temperatures and pressure. However, this process currently produces a considerable amount of CO2. Therefore, the challenge to make green ammonia truly “green” is to decarbonize its production by using renewable energy to power the hydrogen-splitting process. There are multiple plans for large-scale green ammonia production in the coming years, including from CF Industries and Yara International.
Impact
• Fertilizer production, transport, and use contribute to greenhouse gas emissions
• Fertilizer use can lead to eutrophication, when an excess of nitrates and phosphates flood into our lakes and oceans through rainwater or sewage. This is toxic for aquatic life, leading to an overgrowth of algae, and depriving marine animals of oxygen.
•Fertilizers can contain contaminants that may enter the food web (through plants) and can affect soil quality
• Energy use, especially by the nitrogen fertilizer industry, represents up to 50% of the total energy use in crop production
•Inorganic fertilizer use (and manure storage and use) make up almost 40% of agricultural GHG emissions
• Green ammonia production techniques such as hydrolysis, powered by renewable energy, are a stepping stone for a more sustainable industry focused on zero-emissions.
Not Your Father’s Ammonia
The first green ammonia plant, constructed in India and powered by solar energy.
Source: ACME India
Market Movers: Current and Future Heavy Hitters
The fertilizer industry is competitive with just five firms holding most of the market share. Other businesses in the sector encompass smaller, more fragmented parts of the trade. The industry’s primary focus areas are product development, complex fertilizers and customized solutions for specific crops and regions.
Market Movers:
A farmers’ cooperative based in Western Australia with a multitude of business operations including WesCEF, the internal group that manages CSBP Fertilizers. This company handles the manufacturing, importation, and distribution of phosphate, nitrogen and potassium-based fertilizers.
Operating in North America, Australia and South America, Nutrient produces and distributes more than 27 million tonnes of phosphate, potash, and nitrogen products globally.
The first petrochemical company established in Saudi Arabia, mainly producing urea and ammonia.
Operating in the United States, Canada, and the United Kingdom, this company has the world’s largest ammonia production network. In recent years, they have pushed to produce green and blue ammonia and decarbonize their operations.
Leading manufacturer of sustainable fertilizers and producer of advanced fertilizers. They operate globally in North America, South America, Europe, Israel, Asia, Australia and Africa.
Future Heavy Hitters
Indigo AG is a Massachusetts-based company that specializes in naturalizing soil. Through analyzing soil samples and the microbiomes of plants, Indigo is working to reintroduce microbes back into crop environments to sustainably increase crop yield. They’ve tested their microbes on a variety of plants across continents and seasons and have found a 10% increase in yield benefits of crops.
In 2021, Indigo AG began a venture in the carbon market by acquiring Soil Metrics, a company specialized in the measurement of carbon storage in soil. They have continued their efforts in the carbon market throughout 2022, most recently celebrating their first sale of carbon credits from farmers to 17 buyers. They were also accepted into the Climate Action Reserve registry at the end of June 2022.
Pivot Bio is a California-based startup that is focused on increasing the efficiency of fertilizers. Through analyzing the microbes in soil, Pivot Bio’s technology works to analyze how to deliver the most useful nutrients to crops through analyzing their genome. They then help farmers pick the nutrients that will release the most nitrogen into the soil to aid in crop growth.
In 2021, the company was able to triple its revenue and subsequently launched a fourth commercial nitrogen product to replace synthetic nitrogen. Pivot Bio claims that its technology can prevent $200 billion in environmental damage over the next ten years while giving farmers consistent crop yields.
MAN is a German company that specializes in marine and stationary diesel engines. They are also working with green ammonia and have plans to release a two-stroke ammonia-fueled engine for commercial shipping by 2024. MAN Energy Solutions is a subsidiary of the Volkswagen Group.
Yara is a publicly traded Norwegian chemical company whose largest business is fertilizer production. They describe themselves as the industry’s only global crop nutrition company. Yara recently established Yara Clean Ammonia, a unit within Yara, to work on ammonia applications in food production, shipping, power, and industry. Yara held a Capital Markets Day for Yara Clean Ammonia at the end of June 2022 after announcing in May 2022 that it was assessing a potential IPO of Yara Clean Ammonia.
• adapt-N
Adapt-N is a New York-based technology company that provides farmers with recommendations on how to optimize their planting and irrigation systems. Their platform is able to provide farmers with information on manure analysis, field water analysis, and nitrogen stabilizers. In 2017, adapt-N was acquired by Yara International.
Venture Capital/PE and Other Fund Investors
Flagship Pioneering is a venture capital fund that works in human health, sustainability, and life sciences. Flagship was Indigo AG’s first investor, and most recently participated in the company’s $360 million Series F financing.
• Breakthrough Energy Ventures
Breakthrough Ventures is an investor-led fund guided by scientific expertise. The fund specializes in developing new ways for humans to live, eat, travel, and build. In April 2020, they participated in Pivot Bio’s $100 million Series C financing.
• Temasek
Temasek is a global investment company. Temasek also participated in Pivot Bio’s Series C round, along with Breakthrough Ventures.
Activant is a long-term oriented global private investment firm that partners with high-growth companies transforming the industrial complex.
Final Thoughts
As the human population continues to increase, so will the demand for food. Fertilizers provide a path for farms of all sizes to keep up with the demand for crops. Alternatives to traditional synthetic fertilizers, such as micronutrient fertilizers, biofertilizers and green ammonia, represent a way to feed the planet without sacrificing the health of soils and broader ecosystems. However, fertilizer production is energy-intensive and, like many industries, still relies on fossil fuels. In order for fertilizers to reach their full, planet-friendly potential, the industry will need to make strides in renewable energy use in order to fully decarbonize fertilizer production and application. Green ammonia in particular represents an opportunity for innovation and investment as scientists work on projects to clean up its production process.