I have just returned from the Atlantic Dialogues conference 2014 that has been organized by the German Marshall Fund and the OCP Policy Center.
In terms of food security issues it was quite interesting that considerable know-how transfer is taking place between Brazil and Sub-Saharan Africa and that Morocco tries to position itself as fertilizer provider of choice to both agricultural regions. (On this issue also see my recent article in Third World Quarterly about Mining Strategies in the MENA).
The Atlantic Dialogues conference is in its third year now and adds a south-south dimension to the notion of Atlantic Space. This year a conference volume has been published that can be downloaded here.
This chart in my article about the transatlantic trade in agricultural and mineral commodities highlights some interesting facts.
The following conclusions can be drawn for the transatlantic trade in commodities:
- Mineral fuels dominate the global trade of commodities, the Atlantic Space is no exception.
- No country in the word is energy independent. There is a varied trade of refined products besides the trade in mineral fuels. Some crude oil exporters like Nigeria, Angola, Mexico, and Brazil are net importers of such refined products. Net importers of crude oil like the United States and the EU, on the other hand, are net exporters of refined petroleum products.
- China has developed into a major importer of mineral fuels, oil seeds, ores, and precious metals from Africa, Latin America and the Caribbean, and North America. Yet despite this widely publicized rise of China, the Atlantic trade in commodities is still a dominant factor in global comparison.
- The transatlantic trade ties in commodities are particularly close between North America and LAC, on the one hand and between Europe and Africa on the other hand. Trading relations between North America and Africa and between the EU and LAC are also substantial. The focus of this North-South trade is on mineral fuels, ores, precious metals, oil seeds, and tropical agricultural products like cocoa, coffee, and fruit. There is not only a lively trade of refined products from North America and the EU to Africa and LAC, but also between the two northern blocs of the Atlantic Space.
- In comparison, South-South trading relations lag behind in the Atlantic Space. However, because of its underdeveloped agricultural potential, Africa is a major importer of cereals and sugars, which partly come from LAC, and Morocco has developed into a major supplier of fertilizers to Brazil.
Canadian Potash Corporation of Saskatchewan’s planned takeover of Israel Chemicals, a large producer of Potash has run into massive opposition.
Israel’s finance minister Lapid and trade unions oppose the deal vigorously as they fear loss of jobs royalties and a strategic asset.
Potash Corp itself was target of protectionist sentiment in 2010 when a bid by Australian BHP Billiton and a possible counter bid by Chinese Sinochem led to vigorous opposition in Canada that derailed the deal.
In a world of high food prices fertilizers are increasingly perceived as strategic assets as I argue in the last chapter of Oil for Food. Asia in particular has a potash shortage.
The Middle East’s position in global phosphate reserves is more dominant than in the case of oil where it holds 60 percent of conventional reserves. Morocco alone holds over three quarters of global reserves after the recent revisions by the International Fertilizer Development Center and the US Geological Survey.
Iraq has another 9 percent, albeit its reserves are undeveloped. Syria, Jordan, Tunisia are also substantial producers as will be Saudi Arabia once its Al-Jalamid project is fully operational.
As reserves in the two largest producers worldwide, China and the US deplete, the importance of the Middle East in global phosphate markets will grow and therefore their importance for global food security.
With the launch of the Qafco-6 project Qatar is now the world’s largest exporter of urea, with a 15 percent market share. In terms of production it ranks number 4 globally. Saudi Arabia contributes another 10 percent to global urea exports, underlining the Gulf’s importance in global fertilizer markets.
Qatar’s annual capacity for urea is 5.6 million MT. Last year it produced 3.6 million tonnes of ammonia and 4.3 million tonnes of urea.
With ample natural gas supplies globally in the wake of new production techniques like hydraulic fracking there is no shortage of nitrogen fertilizers for the foreseeable future. Yet countries in the Middle East may think how they can leverage competitive fertilizer production for agricultural investments as I have argued elsewhere.
This is particularly true for phosphorus, which is mainly produced from phosphate rocks without alternative production possibilities as in the case of nitrogen and natural gas. Morocco has over three quarters of global phosphate reserves after the recent upgrade of USGS estimates and Saudi Arabia will be also an important producer once the Al-Jalamid project in the North of the country is up and running in 2014.
The UAE has launched a new aquaponics projects with the help of the Khalifa Fund. It combines tilapia aquaculture with vegetable hydroponics by using the waste of the fish as fertilizer.
While wheat production is being phased out in Saudi Arabia there are growth areas in Gulf agriculture, like organic farming and indoor vegetables.
The Gulf also solidifies its position as a major fertilizer producer for global agricultural markets. This is not only true for nitrogen based fertilizer like ammonia and urea that is gained from natural gas, but also for the Al-Jalamid phosphate project, which has started to produce and aims at a 10 percent market share of globally traded Diammonium Phosphate (DAP) fertilizer.
Phosphates are now the focus of Saudi Arabia’s largest mining company Maaden and make up 60 percent of its value according to a research report of Al Rajhi Capital.
On a global level it needs to be noted that the Middle East holds the vast majority of global phosphorus/ phosphates reserves. Fears of a ‘peak phosphate’ by as early as the 2030s have been overblown after the massive upgrade of the Moroccan reserve base, first by the International Fertilizer Development Center and then by the US Geological Survey. Morocco now holds over three quarters of global phosphorus reserves according to the new estimates.
Like Jordan, which also holds considerable reserves, Morocco has been offered GCC membership in the wake of the Arab spring. While this was about politically strengthening Arab monarchies, it is conceivable that Middle Eastern countries might use their fertilizer production in the future to foster relations with agricultural producer countries and improve their food supply security.