SPECIAL REPORT: Will The Fertilizer Shortage Create A Global Food Crisis? | Bruce Sherrick

**Adam Taggart** (0:05)
Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Taggart, welcoming you here for a special report. Approximately one-third of the world's seaborne fertilizer trade passes through the state, the Strait of Hormuz. And with the war there and the Strait of Hormuz closed, there's growing concern that there will be insufficient fertilizer in the Northern Hemisphere for this year's harvest. And just as a reminder, 87 percent of the world's population lives in the Northern Hemisphere. So how concerned should we be? Is there a real risk that, say, another Arab Spring, but this time worldwide, could result as a function of this fertilizer shortage that may be happening right now? To find out, we've got the great good fortune to speak today with Bruce Sherrick. Bruce is professor at the College of Agriculture, Consumer and Environmental Sciences at the University of Illinois Urbana-Champaign.
There, he's the Frewen Professor in Land Economics, and he is also Director at the TIA Center for Farmland Research. Bruce, thanks so much for joining us today.

**Bruce Sherrick** (1:08)
Glad to be here.

**Adam Taggart** (1:10)
Well, first, just before we start, I want to give a thank you to Craig Wischner, the Managing Director of Farmland LP, longtime viewers of this channel, probably familiar with Craig. He's come on a couple of times and talked about farmland as an investment asset, but also talked about the specific opportunities that this fund makes available to accredited investors. I reached out to Craig to see if he could point me in the direction of who he thought was a good expert in fertilizer and food production around this topic. He said, hands down, it's Bruce.
Anyways, I'm very glad you put us in touch with one another, Bruce.

**Bruce Sherrick** (1:44)
No, good to visit with you today. I appreciate Craig's flattery on this. When my kids or others ask me what I do for a living, I say I'm interested in anything that impacts farmland values. The University of Illinois has had a long-standing project called FarmDoc, and we published one article a day and have done so for roughly 26 years now.
Things that relate to farmland, I'm particularly interested in and follow and work with all of the institutional investors, the members of NACRE, the non-members, anybody who views agricultural assets as an investment. I think that was an important point in the introductory points.

**Adam Taggart** (2:21)
Okay. Well, so Bruce, the main thrust of this interview is quite simple. And it's, how worried should we be about the closure of the Strait of Hormuz so far, and the delay, at least we'll say, in getting fertilizer to the Northern Hemisphere farmland?

**Bruce Sherrick** (2:39)
Yeah, it's a very complicated question and I have a lot of thoughts. So again, I'll perhaps provide a bit of a rambling response, but we also have the benefit in terms, economists think anytime there's a natural experiment that it's a benefit, whether it was a good or a bad one. But when we had the Russian-Ukraine conflict began, we also had the closure of a major sea-bearing port through which a lot of commodities and fertilizer moved. With the Strait of Hormuz, we have energy and fertilizer, and energy is also an important input for agriculture and lots of other industries, of course. But one thinks about it in a, it's an overused phrase, but if you zoom out of it and look at time a little bit more completely, there are two things to remember. One, it's a pig in the python problem. It takes a long time to work something through anyhow, and most of the fertilizer was already in place for the Northern Hemisphere planting season this year. Again, the Southern Hemisphere has a different cycle, essentially off by six months. So most of the fertilizer that was necessary had already left the Strait of Hormuz by the time it got to this year's planning. That didn't change the fact that the prices were increased dramatically, and the tariff situation with Canada and Mexico prior to the closure of the Strait of Hormuz also radically impacted the cost of fertilizer.
The other thing to think through, the three major components we like to talk about are NP and K.
The major producers using fertilizer are US., Brazil, there's also China and other parts of the world that are important.

**Adam Taggart** (4:19)
I'm sorry to interject, but just for folks that don't remember their high school chemistry, N is nitrogen, P is?

**Bruce Sherrick** (4:26)
Phosphate.

**Adam Taggart** (4:27)
Phosphate, and then K is potassium, correct?

**Bruce Sherrick** (4:29)
Yeah, K is the confusing one because K also starts with P, potassium. Phosphates are used to produce all the others in a sense, and then you use, again, I know I jumped way into the middle of this deep sea here, but diammonium phosphate, monoammonium phosphate, things are applied in combination sometimes, and the form of nitrogen, whether it's urea, ammonia, so on. Again, we're jumping way deep into it now, but those come from different parts of the world. They really do, and natural gas is one of the major inputs for producing ammonia, ammonia being the nitrogen source.