Fertilizer Price Surge in Poland and Beyond: Seeking the Way Forward towards Sustainable Development

Abstract

The aim of this study is to explore the impact of the main determinants on the rapid increase in fertilizer prices in Poland and to foresee the consequences of this situation regarding sustainable policy developments. We developed linear regression models for N, P, and K fertilizers to show the direction of influence of explaining variables and make a decomposition of the fertilizer price increases. The models illustrate that four major factors were responsible for the fertilizer price increases in Poland in 2020–2022, i.e., wheat, gas, GHGE allowance prices, and domestic production volumes. These factors explained the variation in the price of fertilizers concerned with different strengths. There were also other impacts associated with the ‘black swans’ occurrence (the COVID-19 pandemic and the war in Ukraine). High mineral fertilizer prices provide an opportunity to revise agricultural policy and legislation, taking into account environmental concerns and the latest technological developments. Fertilizer management practices are at the center of a triangle of critical objectives that track the progress toward sustainable agricultural systems, such as (1) an increase in farm incomes, (2) environmental protection, and (3) food and nutrition security. We recommend adjusting the set of explaining variables in the models (i.e., wheat/corn price) to the specificities of the domestic agri-food system. This study provides important guidance for agricultural policymaking, emphasizing the need to integrate sustainable fertilizer management practices to achieve synergies between economic growth, environmental protection, and food security. Such an approach can support the long-term development of agriculture in Poland and contribute to the economic and environmental stability of the agricultural sector.

1. Introduction

The global objective of ‘Zero hunger’ tops the list of the United Nations Sustainable Development Goals (UN SDGs). Without the use of mineral fertilizers, food production would be reduced to a level that cannot even feed 50% of the world’s population [1,2,3]. The use of mineral fertilizers is particularly important in African countries where nations are far behind in meeting the goal of zero hunger, and agriculture contributes significantly to the balance of payments for the economies [4]. Nitrogen (N) fertilizers are particularly essential to the production of cereals (wheat, maize (corn in the US), and rice) based on which important staple foods are produced [3,5,6].

However, mineral fertilizer application pollutes the environment, for example, by N runoff to the water bodies, and might cause threats to human health [7,8,9,10]. This has been reflected inter alia in the Farm to Fork strategy, developed within the European Green Deal, where the goal of reducing the use of fertilizers by 20% by 2030 has been set [11]. It is crucial to build agricultural systems that provide food and nutrition security in a sustainable way, and the adequate management of fertilization is essential in this process.

N fertilizer use, which causes big losses to the environment, has been restricted in some European countries (e.g., Germany) and New Zealand [12]. The United States Environmental Protection Agency (US EPA) has been promoting sustainable fertilizer use and nutrient management and has guided producers and the rest of society in this field. The suggested solutions include recycling biosolids as soil amendments and fertilizer; using manure and crop residues as fertilizers; using waste-derived fertilizers; removing ammonia from livestock wastewater, and recycling it (technology patented by the USDA Agricultural Research Service) [13]. Poland has been implementing a national plan for the environmental regeneration of the soil that has encouraged the use of calcium fertilizers since 2019 [14]. China, which is a significant producer of agricultural products in the global market, reduced the use of fertilizers by 15% between 2015 and 2020 and has prepared two further programs for 2021–2025 to green and modernize agricultural systems by fertilizer use reduction, application efficiency improvements, and widespread utilization of animal manure [12]. It is widely suggested to increase the use of enhanced-efficiency fertilizers which retard and control the release of nutrients into the soil to enhance crop yields and, at the same time, reduce environmental degradation [15] and promote crop–livestock integration. Another pro-environmental solution is to use recycled phosphorus fertilizers [16].

It cannot be denied that farmers run their agricultural holdings to gain profit and ensure the durability of their entities. Thus, economic and environmental issues must work together. There are numerous factors that influence crop yields and farm income, including the use of fertilizers, plant protection means, weather conditions, and natural disasters (e.g., droughts) being, inter alia, the effect of climate change [17,18]. Adequate and affordable access to fertilizers allows farmers to increase their productivity and profitability and thus improve competitiveness [19]. Mineral fertilizers have provided an increase in agricultural productivity but at the cost of a substantial environmental impact, without many alternatives being available [20]. On the other hand, fertilizer best management practices (FBMPs) contribute to climate change mitigation and help farmers adapt to global warming and extreme weather events.

International fertilizer prices were at historically high levels in 2022, which translated into an increase in farm-input costs and/or a reduction in fertilizer consumption and possibly into a decline in the profitability of agricultural holdings across the world. As fertilizers are widely used in current agricultural systems, soaring fertilizer prices have contributed to food price increases and rising food security concerns [21]. The difficult fertilizer market situation could have also contributed to a lower agricultural environmental footprint.

The aim of this study is to explore the impact of the main determinants on the rapid increase in fertilizer prices in Poland and to foresee the consequences of this situation regarding sustainable policy developments.

Poland is one of the major fertilizer exporters and importers in the world in value terms [22,23]. In 2019, Poland was the fifth largest fertilizer exporter in the EU in terms of volume (following Germany, Belgium, Netherlands, and Lithuania). Poland has been primarily the net exporter of N fertilizers, which are critical for plant growth and improving food production. Changes in fertilizer prices in Poland match the global trends, which results, in particular, from the country’s strong position within the global marketplace and the dependency on certain raw materials for producing fertilizers (natural gas, phosphates, potassium chloride) [24]. Thus, this research might be useful for academics, policymakers, governments, and professionals in the agri-food industry from other countries. Our study fills a significant research gap by identifying the factors influencing the variability of fertilizer prices in Poland during their most significant fluctuations, specifically from 2020 to 2022, and by constructing a model that examines the importance of individual determinants. Previous studies have mainly focused on describing the likely effects of these factors without examining their significance or the strength of their impact on price variability [21,25], leaving this area almost entirely unexplored. Therefore, our work provides new, original data and analysis that can significantly contribute to understanding the influence of selected factors on fertilizer price changes in Poland.

2. Background

World market prices for nitrogen (N), phosphorus (P), and potassium (K) fertilizers rose significantly over the period 2020–2022 (Figure 1). Fertilizer prices, calculated through the World Bank methodology, increased sharply in both 2008 and 2022, which were crisis periods. In both cases, this was due to the combined effects of a number of domestic and global long- and short-term supply and demand factors [26]. Food price increases were associated with soaring fertilizer prices, as evidenced by the high correlation coefficient (r = 0.902). The high 2022 fertilizer prices led to a decline in fertilizer use over 2022/2023 and then brought the prices down [25]. The global demand for mineral fertilizers (in metric tons) fell by almost 4% in 2023 as compared to 2022, with decreases in all three types of fertilizers (N, P, and K) [27]. The 2023 fertilizer price index returned to its 2022 level, although it remained high as compared to the situation before the pandemic. The 2023 fertilizer prices were almost twice those recorded in 2019 (Figure 1).

The analysis of international fertilizer prices, such as diammonium phosphate (DAP), urea, and muriate of potash (MOP), showed that the highest rate of increase was observed for urea at the end of 2022 [30]. The fertilizer prices in Poland followed the worldwide trends (Figure 2). Urea is the most commonly applied N fertilizer [21]. The major factor contributing to the surging urea prices during the period considered was a supply shock caused by the Russia–Ukraine war, which started in July 2022. Russia was the world’s largest exporter of urea in 2021 [31] and provided about 14% of the world’s urea production in 2020 [21].

International fertilizer prices started to increase rapidly at the end of 2020 due to the changes in demand. Global mineral fertilizer consumption dropped during the COVID-19 lockdowns but rebounded in late 2020/21 as the restrictions were lifted and crop prices increased [25]. Previous studies identified significant linkages between fertilizer prices (e.g., N fertilizers) and crop prices (particularly corn) [33,34,35]. In the case of Poland, the relationship between fertilizer prices and the buying-in price for wheat is commonly analyzed due to the existing cropping patterns [24]. The rise in the prices of wheat and other cereals in Poland, which accounted for over 68% of the sowing area in 2021 [36], causes farmers to be able to afford the cost of fertilizers and other agricultural inputs. Higher crop prices also represent an incentive for farmers to use more fertilizers due to the expected profitability [37]. Increases in the agri-food commodity prices drive farmers to plant more profitable crops and use more fertilizers. Global fertilizer demand is driven primarily by six crops, i.e., corn (representing 16% of the global farm-use fertilizer demand), wheat (15%), rice (14%), vegetables (9%), fruits (7%), and soybeans (5%) [38].

Over the period 2016–2020, the second biggest exporter of fertilizers was China (especially phosphate ones). Therefore, banning the export of P fertilizers in 2021 and issuing lower export quotas in 2022 by the Chinese government placed additional upward pressure on the world’s fertilizer prices [39,40]. The Russian invasion of Ukraine also increased phosphate-based fertilizer prices, which had a further impact on the prices of corn, soybeans, wheat, cotton, and sorghum [40]. In mid-2022, in response to the outbreak of war in Ukraine, the US and the EU introduced sanctions that excluded Russia and Belarus from the global fertilizer market and prohibited transit through their territory [25]. Given that Russia was the largest exporter of fertilizers overall and, together with Belarus, supplied around 33-41% of the world’s potash exports before the war, the introduced restrictions contributed to spikes in fertilizer prices in 2022 [41].

Some authors suggest that the key factor behind the N fertilizer price rises was the sharp increase in the price of natural gas through 2021 and 2022, especially in Europe and Asia [21,42]. This price rise was associated with the economic recovery from the pandemic accompanied by a surge in demand for natural gas. N fertilizers, including urea, are commonly produced through converting atmospheric nitrogen using natural gas. It has been proved before that a rise in global economic activity pushes up energy prices and then increases agricultural commodity prices [43,44]. The Russian invasion of Ukraine has fed into further gas price spikes, particularly that 30–36% of European natural gas consumption was supplied by import pipelines from Russia over 2015–2021 [42,45]. The rising costs of energy resources also have a negative impact on farmers’ incomes, and this translates into a reduced demand for production means, including fertilizers.

There are high levels of process emissions in the fertilizer industry [1]; thus, the changes in the price of greenhouse gas emission (GHGE) allowances might possibly influence the price of fertilizers. Prices of allowances in the EU Emission Trading Scheme [46] were up by 400% from March 2020 to December 2022 [47].

Huang [26] listed the following supply factors responsible for fluctuations in fertilizer prices during the 2007/08 crisis: the costs of raw materials (including phosphate rock, sulfur, and ammonia), energy and labor costs, and exchange rate changes. As almost 45% of global fertilizer production is traded abroad, exchange rate volatility shapes fertilizer prices on both domestic and global markets [1,48,49]. Exchange rate volatility can have both positive and negative effects on foreign trade, which is why it is so important to create conditions for maintaining the competitiveness of exporters in the global market [48,50]. In practice, a large part of the exchange rate fluctuations is absorbed by traders participating in international trade, as they do not necessarily adjust their prices to the current domestic prices immediately. However, the previously incurred costs of entering a given market contribute to firms staying in this market, even if the importer’s currency is undervalued [51]. It is worth noting that agricultural and energy products, especially mineral fertilizers, are much more dependent on the exchange rate than other commodities [52].

3. Materials and Methods

The methodological approach was firstly to undertake a narrative literature review to outline the challenge of high fertilizer price increases in 2021 and 2022. At first, we selected the factors influencing fertilizer price changes on the basis of the literature review [21,25,26,35], taking into account the specificities of the Polish economy [24]. The list of explanatory variables includes (a) natural gas prices, (b) GHGE allowance prices, (c) wheat prices, and (d) fertilizer production volume in Poland. Currency exchange rates from the period 2020–2022 were used to supply input to the models in Polish zloty. The complexity of the analyzed issue and the specificities of the Polish market justify the decision to choose this set of variables. The daily data for the period 1 January 2020–31 December 2022 were derived from Investing.com (a credible financial markets platform)—(a), (b), and the currency exchange rates; the reports from the Agricultural Advisory Center (AAC) in Brwinów [32], Poland (a state organizational unit subordinate to the minister responsible for rural development)—the fertilizer prices; Statistics Poland [36] (a chief government executive agency responsible for collecting and publishing national statistics)—(d); and agrolok.pl (Polish agri-food data portal run by a production and trading company)—(c).

Then, we explored the influence of these independent variables on a fertilizer price in Poland. Further analysis of the fertilizer data presented by Statistics Poland and the AAC in Brwinów enabled us to select five fertilizers for the models, i.e., ammonium nitrate (AN), calcium ammonium nitrate (CAN), urea (U), enriched superphosphate (ES), and potassium salt (PS).

The impact of the explanatory variables on the changes in fertilizer prices in Poland was determined using the classical least squares method (1). This is a popular tool for assessing the impact of various factors on economic phenomena, as well as for forecasting [53]. The advantage of the created models is their advanced mathematical framework, which allows for parameter estimation, comprehensive model fit assessment, and interpretations of the results [54].

$$P_{Fertilizer}={\alpha }_0+{\alpha }_1\times Gas+{\alpha }_2\times Emission+{\alpha }_3\times Wheat+{\alpha }_4\times Productio{n}_{Fertilizer}+\epsilon$$

(1)

where $P_{Fertilizer}$—fertilizer price; $Gas$—the natural gas price; $Emission$—GHGE allowance price; $Wheat$—wheat price; $Productio{n}_{Fertilizer}$—domestic production volume

Adaptation of the linear regression model is a relevant method for estimating fertilizer prices. The models created for each selected fertilizer can be described by one general Formula (2). Models for the five analyzed types of fertilizers were estimated with the use of daily data from the years 2020–2022 (n = 770). The models were reduced using the omitted variable test to include only statistically significant variables. The quality of the models was assessed using the adjusted coefficient of determination and the information criteria AIC (Akaike information criterion) and BIC (Bayesian information criterion). The statistical significance of the model was evaluated using the Fisher–Snedecor F-test [53].

For each of the five models, regression coefficients were estimated to show the direction of influence of each of the variables taken as explanatory factors for the fertilizer price changes in 2020–2022. Based on the directional coefficients and the price changes of each factor, a decomposition of the price increase of each fertilizer was made according to the following equation:

$$\mathsf{\Delta }{P}_{Fertilizer}=a_1\mathsf{\Delta }Gas+a_2\mathsf{\Delta }Emission+a_3\mathsf{\Delta }Wheat+a_4\mathsf{\Delta }Productio{n}_{Fertilizer}$$

(2)

• $\mathsf{\Delta }$P_Fertilizer—change in the model price of fertilizer in the period (2020–2022);
• $\mathsf{\Delta }$Gas—change in the price of natural gas in the period;
• $\mathsf{\Delta }$Emission—change in the price of GHGE allowance in the period;
• $\mathsf{\Delta }$Wheat—change in the price of wheat in the period;
• $\mathsf{\Delta }$Production_Fertilizer—change in the production of fertilizer in the period.

The weighted contribution of each variable was calculated, illustrating its contribution to the increase in the model’s price of each fertilizer:

$${\displaystyle \frac{a_1\mathsf{\Delta }Gas}{\mathsf{\Delta }{P}_{Fertilizer}}}+{\displaystyle \frac{a_2\mathsf{\Delta }Emission}{\mathsf{\Delta }{P}_{Fertilizer}}}+{\displaystyle \frac{a_3\mathsf{\Delta }Wheat}{\mathsf{\Delta }{P}_{Fertilizer}}}+{\displaystyle \frac{a_4\mathsf{\Delta }Productio{n}_{Fertilizer}}{\mathsf{\Delta }{P}_{Fertilizer}}}=1$$

(3)

It is worth noting that the inclusion of wheat prices as an explanatory variable in fertilizer price models can be justified by previous studies. Prices of agricultural crops (e.g., maize) have already been used to explain the variability of nitrogen fertilizer prices, although this has been linked by authors to biofuel production [55,56]. Wheat is not used for this purpose; however, it dominates the structure of cereal crops in Poland. Thus, it represents a demand factor that, as it turned out, significantly affects fertilizer prices in Poland and improves the quality of fertilizer price dynamics models.

4. Results

4.1. Descriptive Statistics

We are starting by presenting and analyzing the basic descriptive statistics for the chosen variables (

Table 1. Descriptive statistics for variables (n = 770).

Variable	Mean	SD	Median	Min	Max	Skewness	Kurtosis
Gas	17.39	10.39	13.96	6.06	46.34	0.91	−0.35
Wheat	1128.30	357.09	985.00	690.00	2010.00	0.54	−1.15
Emission	1127.80	557.33	1110.90	306.52	2207.50	0.10	−1.53
PriceAN	241.08	141.70	138.50	116.50	460.00	0.62	−1.39
ProductionAN	2.11	0.36	2.14	0.89	2.62	−1.19	2.04
PriceCAN	232.15	145.88	130.50	109.50	520.00	0.75	−1.04
ProductionCAN	1.15	0.28	1.67	0.69	2.05	−1.17	2.04
PriceU	295.63	170.56	190.00	141.00	614.50	0.68	−1.18
ProductionU	1.06	0.18	1.081	0.45	1.32	−1.17	2.02
PriceES	234.60	91.46	170.50	132.00	436.00	1.05	−0.10
ProductionES	0.19	0.04	0.20	0.10	0.26	−0.51	0.44
PricePS	236.76	99.44	171.50	155.00	485.00	0.98	−0.45
ProductionPS	1.40	0.27	1.14	0.50	1.86	−0.91	1.71

).

The time series includes daily data from 2020–2022, so the values of the variables in the time series describe the magnitude of the variable at a specific moment (a specific day). For the group of price variables, high volatility can be observed, with the volatility for fertilizer prices oscillating around 60% for ammonium fertilizers and 40% for the prices of other fertilizers. The volatility of other factors ranged from 32% (wheat) to 60% (natural gas price). Volatility was noticeably lower in the group of production volumes, ranging from 17% (for AN) to 24% (CAN).

For the price variables, in each case, the value of the arithmetic mean was higher than the median, which, combined with the positive value of the skewness, indicates the presence of right-hand asymmetry of average or high strength. An explanation for this situation is the occurrence of a small number of observations that are significantly higher than the mean.

The negative value of kurtosis for the price variables indicates the presence of a distribution that is more flattened than a normal distribution, meaning that values are scattered along the distribution. More values are located at the tails of the distribution, and this, combined with the positive skewness, indicates a large number of values that are below average (especially in the 2020–2021 period) and a small but significantly above-average number of outliers (mainly located in 2022).

For the production variables, the median is higher than the mean, and the skewness values are negative. This informs us of a negative asymmetry of significant strength, which, juxtaposed with the positive value of kurtosis, indicates a distribution centered around the arithmetic mean, where most observations are lower than the average, but at the same time, there are rare but significantly influencing outliers on the left side of the distribution (2022).

Outliers and extremes are especially associated with 2022 but are of a different nature; for the price variables, they are close to the maximum values, while for the variables describing production volume, they are close to the minimum values.

4.2. Ammonium Nitrate

All variables included in the model proved to be statistically significant, with most at the p < 0.001 level (Appendix A,

Table A1. The developed models for specific fertilizer prices.

Fertilizer Price (PFertilizer.)	Variables	Coefficient	Std.Error	t-Ratio	p-Value (t)	R-Squared	Adjusted R-Squared	F	p-Value (F)
Ammonium Nitrate (PAN)	const	−89.1049	11.8638	−7.511	1.64 × 10−13	0.937073	0.936744	2847.995	0.000000
	Gas	2.88053	0.328681	8.764	1.21 × 10−17
	Emission	0.0227417	0.00565088	4.024	6.28 × 10−5
	Wheat	0.264571	0.0107199	24.68	2.20 × 10−99
	ProductionAN	−20.8691	4.58416	−4.552	6.17 × 10−6
Calcium Ammonium Nitrate (PCAN)	const	10.6091	15.7702	0.6727	0.5013	0.894198	0.893645	1616.374	0.000000
	Gas	1.78096	0.436103	4.084	4.90 × 10−5
	Emission	0.0229189	0.00752159	3.047	0.0024
	Wheat	0.271087	0.0143255	1.92	8.39 × 10−66
	ProductionCAN	−85.7357	7.81383	−10.97	4.08 × 10−26
Urea (PU)	const	12.9966	15.3233	0.8482	0.3966	0.926991	0.926609	2428.287	0.000000
	Gas	1.43523	0.423742	3.387	0.0007
	Emission	0.0266930	0.00730532	3.654	0.0003
	Wheat	0.344487	0.0139155	24.76	7.80 × 10−100
	ProductionU	−151.408	11.7552	−12.88	1.69 × 10−34
Enriched Superphosphate (PES)	const	192.814	16.3941	11.76	1.80 × 10−29	0.770623	0.769424	642.5313	7.6 × 10−243
	Gas	2.52996	0.355582	7.115	2.58 × 10−12
	Emission	0.0265451	0.00696588	3.811	0.0001
	Wheat	0.0698819	0.0136079	5.135	3.58 × 10−7
	ProductionES	−587.806	54.3990	−10.81	1.99 × 10−25
Potassium Salt (PPS)	const	197.687	12.9705	15.24	5.22 × 10−46	0.853379	0.852805	1486.119	0.000000
	Gas	4.73612	0.305369	15.51	2.20 × 10−47
	Wheat	0.0817792	0.00935208	8.744	1.41 × 10−17
	ProductionPS	−96.9638	6.06225	−15.99	6.70 × 10−50

). The model explained almost 94% of the variation in the price of ammonium nitrate (adjusted R-square was 0.9367). The modeled fertilizer price responded to the changes in factors, as expected. Production cuts, increases in the prices of gas, the GHGE allowance, and wheat led to an increase in the fertilizer price.

Between January 2020 and December 2022, the price of ammonium nitrate in Poland increased by 252%, from PLN 130.50/dt to PLN 460.00/dt (Figure 3). The actual price change was PLN 329.50/dt, while the model estimated it at PLN 244.70/dt. The model of changes in the fertilizer price explained 71.3% of the modeled increase to a nearly 2-fold increase in the price of wheat. A total of 13.5% of the share was accounted for by an almost 2.9-fold increase in the gas price, while 12.7% of the total increase was explained by the model by a more than 4.1-fold increase in the GHGE allowance price. The remaining 2.4% of the increase in the price of ammonium nitrate was attributed to a 12% decline in fertilizer production. The relatively small impact of the reduction in domestic production is most likely due to the increase in duty-free imports of N fertilizers to the Polish market from outside the EU following the outbreak of war in Ukraine. Replacing more expensive domestic production with cheaper imports neutralized the impact of the production limitation.

Thus, three factors were responsible for almost all of the increase in the price of ammonium nitrate in the 2020–2022 period as follows: the increase in market prices of wheat, natural gas, and GHGE allowances.

$${\widehat{P}}_{AN}=-89.105+2.881\times Gas+0.023\times Emission+0.265\times Wheat-20.869\times Productio{n}_{AN}$$

(4)

4.3. Calcium Ammonium Nitrate

The change in the price of nitrate was explained by a model in which all four variables were found to be statistically significant at the p < 0.001 level (Appendix A, Table A1). The variables interacted with the price of fertilizer similarly to those for ammonium nitrate. A positive effect on fertilizer price growth in 2020–2022 was shown by the model for increases in natural gas, GHGE allowance, and wheat prices. The fertilizer price increase was also caused by its limited production. The model explained more than 89% of the variation in the fertilizer price during the period under study (the adjusted R-square was 0.8936).

Between January 2020 and December 2022, the price of calcium ammonium nitrate increased by 267%, from PLN 119.00/dt to PLN 437.00/dt (Figure 4). The actual price change was PLN 318.00/dt, while the model estimated it at PLN 249.90/dt. The fertilizer price increase was most influenced by the wheat price increase (71.6% share). More expensive GHGE allowances explained 12.6% of the total modeled fertilizer price increase, while the natural gas price increase and production restrictions explained 8.2% and 7.7% of the fertilizer price increase, respectively.

Thus, as in the case of ammonium nitrate, the wheat price increase, as well as the rising price of GHGE allowance, were the key factors to which the model attributed more than 84% of the change in the fertilizer price in the period. The reduction in fertilizer production was of relatively minor importance in this case.

$${\widehat{P}}_{CAN}=10.609+1.781\times Gas+0.023\times Emission+0.271\times Wheat-85.735\times Productio{n}_{CAN}$$

(5)

4.4. Urea

The model for the changes in the urea price is also based on four statistically significant variables (p < 0.001) and explains almost 93% of the price change over the period 2020–2022 (Appendix A, Table A1). As in the previous cases, the model assigned expected directions of influence to all identified factors.

Between January 2020 and December 2022, the price of urea increased by 210%, from PLN 155.00/dt to PLN 480.00/dt (Figure 5). The actual price change was PLN 325.00/dt, while the model estimated it at PLN 302.30/dt. The factor effect is analogous to the previous two cases of N fertilizers. It relies on the significant impact of the change in the wheat price, to which it attributed a 75.2% share of the total model increase. The second largest impact factor for the model price of urea was the price of GHGE allowance, to which the model attributed 12.1% of the entire increase in urea price. A 12% reduction in domestic fertilizer production explained the 7.3% of the urea price increase. The increase in the price of gas had a similar impact (5.4% of the total increase).

Thus, the model for the price of urea in the analyzed period is in line with the ones developed for other N fertilizers. It allowed us to explain the changes in the price of these fertilizers in Poland primarily by the changes in the price of wheat and of GHGE allowances, which together accounted for over 87% of the change in the price of urea.

$${\widehat{P}}_U=12.997+0.344\times Wheat+1.435\times Gas+0.027\times Emission-151.408\times Productio{n}_U$$

(6)

4.5. Enriched Superphosphate

The model of the price changes for superphosphate differs from the models estimated for N fertilizers in the structure of the interaction of factors, explaining almost 77% of the fertilizer price variation with four statistically significant variables. The adjusted R-square is 0.7694 (Appendix A, Table A1). However, as with the N fertilizer models, the direction of influence of all factors is logical and consistent with intuition and press releases.

Between January 2020 and December 2022, the price of enriched superphosphate increased by 230%, from PLN 132.00/dt to PLN 435.00/dt. The actual price change was PLN 303.00/dt, while the model estimated it at PLN 157.10/dt (Figure 6). Contrary to the previous model, the impact of the wheat price increase is weaker. With a nearly 2-fold increase in the price of wheat over the three-year period, the model attributed to it a 29.3% share of the fertilizer price increase, similar to the impact of the reduction in its production (accounted for a 29.1% increase). The price of the GHGE allowance, which became more than 4.1 times more expensive during the period concerned, explained another 23.1% share of the fertilizer price increase, while the remaining 18.4% was attributed to the gas price increase. Thus, unlike the models for N fertilizers, in this case, the impact of all four variables was more closely aligned.

$${\widehat{P}}_{ES}=192.816+2.530\ast Gas+0.027\ast Emission+0.070\ast Wheat-587.806\ast Productio{n}_{ES}$$

(7)

4.6. Potassium Salt

In the last model analyzed, three of the four factors were indicated as significant at the p < 0.001 level. The model explained more than 85% of the variation in the potash salt price (the adjusted R-square coefficient was 0.8528). All variables interacted in directions consistent with intuition: an increase in the price of fertilizer resulted from the higher natural gas and wheat prices, and the effect was amplified by a reduction in domestic production (Appendix A, Table A1).

Between January 2020 and December 2022, the price of potassium salt increased by 213%, from PLN 155.00/dt to PLN 485.00/dt (Figure 7). The actual price change was PLN 330.00/dt, while the model estimated it as PLN 205.20/dt. The structure of the impact of specific factors was closer to the model for superphosphate than for N fertilizers. The main factor influencing the changes in the potassium salt price was the reduction in domestic production. It caused 47.3% of the total increase in the fertilizer price (production decreased by one-third during 2020). More expensive gas and wheat almost equally explained just over 26% of the fertilizer price increase over the period studied. In contrast to the previous models, the main burden of the model increase in the potassium salt price was attributed to the reduction in its production.

$${\widehat{P}}_{PS}=197.687+4.736\times Gas+0.082\times Wheat-96.964\times Productio{n}_{PS}$$

(8)

Figure 8 provides a summary of the impact of the individual factors on the price changes in the analyzed fertilizers between 2020 and 2022. It clearly shows the similarities described earlier in the models for N fertilizers, explaining the price changes of these fertilizers, mainly through the changes in wheat prices and the more balanced models for P and K fertilizers.

5. Discussion

Fertilizers are characterized by the price inelasticity of demand, so even in the long term, an increase in price does not significantly reduce consumption, and the price is not a balancing factor in the market [57]. Although Huang [26], analyzing fertilizer price increases after the 2007/08 price shock, identified low domestic stocks, coupled with the inability of fertilizer producers to quickly adapt to the rising demand and sharp decline in international supply, which manifested itself in rising raw material prices, production cutbacks, and declining imported supplies as the main factors driving the upward price spiral of these products. It is highly likely that a similar situation happened over the COVID-19 pandemic and fertilizer producers were not prepared to meet the growing demand for fertilizers. Then, gas and other energy resource prices increased significantly in Europe after the 2022 outbreak of war, which stressed the global fertilizer market.

The Russian invasion of Ukraine contributed significantly to the disruption of the global fertilizer trade [58]. Although fertilizer prices were still high in 2023, they were well down from their 2022 peaks (Figure 1). The situation discussed changed the supply chain flows and trade linkages [25]. During 2022, the United Arab Emirates, Oman, Turkey, and Canada were among the fastest-growing fertilizer exporters. Fertilizer prices differ throughout the world because of different socio-economic situations of farmers, differences in the nutritional state of the soil, and cropping patterns. The analysis of the factors affecting the fertilizer price changes should be conducted with a consciousness of cross-country differences that result from different levels of development, the state of agricultural R&D, farms’ infrastructure, and natural conditions regarding soil, topography, climate, and weather. We provide new, original results of data analysis and build a model that can significantly contribute to understanding the influence of selected factors on fertilizer price changes in Poland. This is our contribution to the literature, particularly since previous studies were of a purely descriptive nature [21,25].

Workman [59] notes that more than half of the global fertilizer trade is concentrated in the hands of six major exporters, including Russia, Canada, China, the US, Morocco, and Saudi Arabia, in 2021–2022. Westra [60] describes fertilizer as a global commodity influenced by a variety of market factors beyond the control of producers. As a result, fertilizer prices are much more volatile than the production and consumption of other products. Furthermore, the transport costs of fertilizers account for a large percentage of their price structures on international markets, which is particularly acute in land-locked African countries [57]. Yang et al. [61] state that if 70% of the world’s fertilizer production were to remain in the countries where the pure components are sourced, fertilizer consumption would increase by up to 1200%, which would contribute to lower fertilizer prices and lower international agri-food product prices, but also to a higher environmental burden. It has been noted that reserves of fertilizer minerals are very limited, while demand far exceeds domestic production in India and many other countries. It contributes to the development of international trade in mineral fertilizers. Furthermore, the economic efficiency of mineral fertilizers fell dramatically in 2020 as the price hike in fertilizers became dearer than food [62]. Therefore, governments were expected to take urgent steps to improve the availability, accessibility, and affordability of mineral fertilizers in order to maintain an adequate level of the farmers’ income and moderate food price increases going forward. However, the 2021–2022 food price spikes contributed to an increase in demand for the fertilizers concerned and a decline in the fertilizer prices in 2023. Furthermore, new trade routes and patterns have emerged. Greater diversification of producers and exporters of mineral fertilizers should create greater stability and resilience. Expanding the production of “green ammonia”, produced through electrolysis powered by renewable energy and other “green” fertilizers, would help to decrease the industry’s reliance on fossil fuels and enhance the diversity of the global fertilizer market. Since a small number of producing countries still dominate global exports and the progress of green alternatives is very slow, importers remain vulnerable to future shocks. Current tensions in the Middle East (an important N-producing region) related to the Israel–Hamas war could cause the next fertilizer trade shock and price changes [63].

Since fertilizer prices are crucial factors behind food price volatility, a systematic development and implementation of strategies to control the fertilizer price risk is essential for ensuring food security [21]. This creates some rationale for developing an effective state policy that covers the fertilizer market and international trade and has an impact on agricultural systems. However, it is not to deny that free markets are welfare optimizing. The prices of fertilizers and food rose sharply in times of crisis (2007–2008, 2010–2012, and 2020–2022) (Figure 1), and it can be expected that these past trends will happen again in the future. Tiwari et al. [64] have proved that “the agricultural sector is the most affected by shocks from the other markets”. The changes in agricultural raw material prices during crises influenced the demand for agricultural inputs, including fertilizers [33,34,35]. Higher fertilizer prices cause farmers to extensify agricultural production [65]. There is a land-fertilizer substitution, which has both positive and negative impacts on the sustainability of the food systems. This is because agricultural land expansion and deforestation cause losses in carbon stocks and biodiversity [66]. The new sustainable development paradigm enhances farmers to carry out both the production of crops and animal husbandry with the use of crop residues and organic manures together with the use of mineral fertilizers. Furthermore, the environmental impacts of livestock production can be reduced with the use of biodiversity-friendly systems [67].

The International Fertilizer Association [12] predicts fundamental changes in agriculture, with a greater focus on finding global solutions to balance food security and environmental protection. The need to improve food security while reducing the overall environmental impact of agriculture requires the optimal management of plant nutrients and the use of FBMPs [68]. Animal and plant fertilizers currently account for only 1% of global fertilizer exports [59], but this share is expected to grow along with the paradigm of integrated soil fertility management (ISFM) [4]. ISFM combines the use of mineral fertilizers with organic nutrient inputs. This expectation is reflected in national food policies that have been developed in several countries, including the US and China. The changes in the structure of mineral fertilizer use in Poland followed the global trend, in which nitrogen demand is growing more slowly than the demand for phosphorus and potassium [14], which might be important for achieving the optimal N/P/K ratio. However, N fertilizers still hold a dominant position in the structure of mineral fertilizer use in Poland [36]. The use of calcium fertilizers grew significantly over the period 2010–2020, inter alia, due to the realization of the Polish national plan for the environmental regeneration of the soil and financing the changes with de minimis support [14].

It is worth mentioning that there are three instruments of the Green Architecture of the 2023–2027 Common Agricultural Policy that address the climate and environment objectives of the EU. Some of the measures are related to FBMPs, e.g., maintaining permanent grasslands over the long run reduces the need for nitrogen fertilization; promoting crop diversification and green cover together with introducing legumes should positively influence soil quality (including fertility) [69]. Bonuses granted to farms are meant as an incentive for the beneficiary to implement practices with well-established positive ecological impacts. The other important matter is that “fertilizer decisions made by grain growers are changing in the context of changing climatic conditions and growing volatility in global fertilizer and grain markets” [70]. Thus, policymakers, governments, and business people should take into account factors to which grain growers are particularly sensitive, e.g., agronomic factors (the amount and distribution of rainfall, etc.) and logistic factors (difficulties with fertilizing increasing areas in short periods of time, etc.) [70].

The COVID-19 outbreak, the Russia–Ukraine conflict, and associated soaring food and input prices (energy and fertilizer prices in particular) stressed the global food system, with food security consequently deteriorating across the world over the period 2020–2022 [71]. Massive growth in fertilizer prices had a huge impact on the agri-food sector all over the world, including reductions in crop yields, the food inflation rate, and the state of food security [21,71,72]. The developed models illustrate which factors were responsible for major increases in fertilizer prices in Poland (N, P, and K) over the period concerned. There were four major factors responsible for the significant increases in the price of N fertilizers in Poland, i.e., surges in wheat, gas, and GHGE allowance prices, and domestic production volumes. These factors explained 70–90% of the fertilizer price changes, which means that we identified the most important causes of this situation. The analyses performed imply that there were also other impacts on N fertilizer price rises, which were difficult to identify. The problems with recognizing and assessing the causes and consequences of price rises are specific for crises situations and the price shocks associated with ‘black swan’ occurrences such as the COVID-19 pandemic and the outbreak of war in Ukraine.

The increase in wheat price explained ca. 70% of the variation in the price of the three N fertilizers concerned (p < 0.001). Significant rises in wheat prices translated into major increases in agricultural income in Poland. The average yearly nominal disposable income per farmer household in Poland increased by 29% over the period 2019–2022 [36]. Including the price of wheat as an explanatory variable in fertilizer price models was justified not only by previous studies [55,56] but also by a further improvement in the quality of the models. The developed model of price changes for superphosphate shows that all four factors considered (the changes in wheat price, GHGE allowance market price, natural gas price, and domestic production volume) are more or less equally responsible for the fertilizer price increases over the period 2020–2022. Potassium salt price increases could be mainly attributed to lower domestic production volumes but also to more expensive gas and wheat that determine an increase in fertilizer production costs and surging domestic demand for the means of agricultural production, respectively. The point is that domestic production volumes of specific fertilizers vary around the world, and it is quite common to replace more expensive domestic production with cheaper imports (that neutralizes the impact of the reduction in production capacity).

One of the main limitations to the accuracy of model construction was the availability of data. In some periods, fertilizer prices in Poland were reported on a monthly basis. There were also some difficulties with collecting precise production volume data from Statistics Poland due to data grouping.

6. Conclusions

The choice of demand factor leading to higher fertilizer prices (such as wheat prices) made during the process of building the models should be adjusted to the existing patterns in agriculture in a specific country. Corn prices (feed prices) would probably be of great importance in countries where livestock production occupies an important place in farming (e.g., the US), and this is the added value of our article. This statement could be interesting for academics and policymakers across the world. Future research could aim at assessing the costs and benefits of ISFM using the latest technological developments.

The point is that reduced consumption of fertilizers (especially nitrogen ones) due to price increases has both negative and positive consequences for society and decision-makers, especially when we consider the situation in the long run in the context of sustainable development. The positive ones include (i) lower environmental burden; (ii) incentives for developing farm innovations regarding replacing conventional fertilizers with other material and non-material means of production, the use of which might be more sustainable; (iii) necessary farmers’ support from the UE (in the case of EU members) and/or state budget. The negative consequences of steep fertilizer price increases include (i) lower crop yields, (ii) higher agricultural production costs and possibly lower profitability, and (iii) higher food prices and endangered food security.

Thus, extremely high fertilizer prices might create an opportunity for policy developments aiming at mitigating the effects of climate change and meeting the UN SDGs. It is worth adding that Xu et al. [10] estimated the opportunity costs of reducing N runoff to the Gulf of Mexico, which included consumer and producer welfare losses. It seems that the issues identified need government support, which might be focused on promoting sustainable FBMPs and investing in innovative and environmentally friendly solutions on farms. This should result in higher competitiveness of agricultural producers, no matter where they are located, and possibly create harmony between cutting-edge technology and respect for the environment. Poland, the US, China, Germany, New Zealand, and many other countries have already run programs focusing on environmental regeneration of the soil and efficient use of fertilizers [14], and this may be a good starting point. However, different structural, natural and agro-climatic conditions across the world could be reflected in performance-based fertilizer use policy where a particular target for GHGE is set. There is a great need for a rapid increase in investment in research and development in the “green” fertilizer sector, and government support is desired in this area.

The fertilizer price surge of 2022 has signaled that existing agri-food policies and regulations need to be reviewed and revised thoroughly in order to better enhance sustainable development in light of the increasing uncertainty caused inter alia by global or regional political situations, public health issues, climate change, and global warming. It seems to be crucial to support crop–livestock integration and biodiversity at the same time and to constantly educate people in the field of sustainable agricultural practices. National agri-food policies should be revised to meet the goals of zero hunger and no poverty (social objectives), reach the goal of climate neutralization (environmental objective), and increase the income of farmers and competitiveness of their farms (economic objective) simultaneously. FBMPs are in the center of the triangle of these three goals.