By Assaf Dotan, CEO of Grace Breeding
Whether going to the grocery store, farmers’ market, or a restaurant, it’s impossible to ignore the rapid rise in food prices. To understand a major factor behind inflating food prices, let’s look back in history at the industrialization of an important inorganic compound, ammonia.
In 1909, German chemist Fritz Haber discovered the perfect mixture of temperature, pressure, and catalysts needed to distill nitrogen from liquefied air, reacting it with hydrogen generated from methane and steam to make ammonia—a process known as nitrogen fixing. Carl Bosch then developed a method to provide ammonia on an industrial scale.
Now produced on an industrial scale, ammonia enabled the mass production of synthetic fertilizers, which drove crop yields to rise between 20 and 50 percent in what is today known as the Green Revolution. Now let's fast forward to February 2022 and Russia’s invasion of Ukraine. But how does Russia’s invasion of its neighbor and the tragic ongoing war that drags on to this day have anything to do with rising food prices?
Russia’s invasion and food prices
Most investors, especially Europeans, understand the impact of Russian energy (natural gas) on the price of global commodities. Yet as energy prices stabilize and last year’s 40-year high inflation levels out, some key agricultural products like oranges, cocoa, sugar, tea, and potatoes—all which rely on nitrogen-based fertilizers—remain high. That’s because unprecedented sanctions by Western nations and their allies on the entire Russian economy has disrupted the flow of nitrogenous fertilizers, of which Russia produces around 25 percent of the global supply, causing prices to soar.
Other factors caused by the war, including the disruption of Ukrainian wheat exports, played a role in inflating global food prices. But with food insecurity steadily rising since 2019, an estimated 783 million people suffered from food insecurity in 2022—that’s more than the entire population of the U.S. doubled plus the population of Germany.
With rising food prices, fertilizer shortages, and growing food insecurity, now is the perfect time to start reducing our dependence on nitrogen fertilizers. Despite their commonality across the globe and the important role they play in maintaining agricultural outputs, the harm they cause the environment undermines our current need to find sustainable food sources.
Nitrogen fertilizers and the environment
The damage caused by synthetic nitrogen fertilizers like urea or calcium ammonium nitrate starts during production, where natural gas is burned to extract liquid ammonia. This practice, first used by Haber and Bosch, releases greenhouse gas into the atmosphere in the form of carbon dioxide. But the harm to the planet doesn’t end with its production.
When nitrogenous fertilizers are applied to plants, there is often excess fertilizer that ends up being converted into nitrate by soil bacteria. Water-soluble nitrate then gets flushed out of soils, polluting groundwater, streams, rivers, and oceans. Nitrogen-based fertilizers damage the relative composition of crops and the fertility of the soil, wreaking havoc on all types of ecosystems.
Furthermore, traces of nitrate have been found in drinking water, which poses serious health risks including cancer and adverse reproductive outcomes. In short, synthetic nitrogen fertilizers harm our health, the environment, and by damaging the soil, they stifle future yields, thus adding another challenge for sustainable food production to overcome. And therein lies the dilemma: Synthetic nitrogen fertilizers are needed to feed a growing global population, but their use harms the planet and undermines sustainable agriculture going forward.
Fortunately, research and development efforts for cleantech and emissions-related solutions have unlocked some ways to cut our dependence on these climate-harming fertilizers. Nitrogen fertilizers alone contribute a significant 5 percent of all greenhouse gas emissions (more than global aviation and shipping combined) according to new research from Cambridge University—two-thirds result after the fertilizers are used in the field, and a third comes from production.
Reducing agriculture’s carbon footprint requires a broad range of solutions, tools, and technologies that don’t disrupt farms’ output or farmers’ bottom lines, and most importantly, don’t produce greenhouse gas emissions. To make this happen, a combination of scalable technological and policy solutions are needed alongside private-capital investments.
VC investment in carbon tech reached almost $28 billion over the last two years, including $13.8 billion raised in 2022, a year that saw a steep decline in overall VC deals. While promising, it’s not nearly enough to replace a nitrogen fertilizer industry valued at over $60 billion last year.
The Passing of the U.S. Inflation Reduction Act provides incentives for investments in renewable energy and green technologies. This could provide a blueprint for the EU and other sovereign countries, but there’s still a sense among retail and institutional investors that green investments are unproven. A wave of fresh investments in the space could build momentum and crush the uncertainty surrounding clean energy and green investments.
Where can investments help?
But with additional funding and favorable policies that harness new technologies and incentivize farmers to employ carbon-farming practices that boost soil carbon sequestration, a serious blow to synthetic nitrogen fertilizers can be dealt. Practices such as crop covering, conservation tillage, organic mulching, and agroforestry promote healthier more sustainable soil while reducing emissions.
These practices can be paired with advanced precision farming technologies that include satellite imaging, AI and machine learning, weather sensors, smart devices, IoT tools, and drones to keep track of data and maximize a farm’s productivity. To supplement carbon farming and digital tools geared towards boosting farm efficiency, biological and organic farming solutions should also play a part.
Biological nitrogen fixation enables plants to maximize their nitrogen use, drip irrigation feeds the plants with nutrients and water directly to the roots, and biostimulants can be leveraged by farmers in extreme climate conditions to maintain outputs. These low-cost processes are fairly easy to implement and complement carbon-farming practices and farm-management technologies.
Overcoming the impact of nitrogen fertilizers while combating food insecurity, first and foremost, requires additional funding from the private sector along with public-sector initiatives that address farmer’s needs and concerns. With real tools and solutions available, the key to curbing greenhouse gas emissions in agriculture while maximizing productivity lies in our ability to scale up solutions to the same level as nitrogen fertilizers.
About the author:
Assaf is an agrotech specialist and serves as the CEO of Grace Breeding, an agrotech company that develops biological fertilizers. He is a 15 year veteran of ADAMA agriculture solutions, where he held various managerial positions, leading international rebranding projects and marketing mindset transformation. Assaf is also a private business consultant specializing in agriculture investments. Assaf holds an MBA from Northwestern University - Kellog Recanati and a B.SC in agriculture from the Hebrew University of Jerusalem. He also serves as an Advisory Board member for several notable Israeli startups.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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