EuroChem Agro GmbH. Introduction in EEF technologies and economical evaluation. Who pays for it? Dr. Thomas Mannheim, Head of Global R&D EuroChem

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EuroChem Agro GmbH Introduction in EEF technologies and economical evaluation. Who pays for it? Primeras Jornadas técnicas RED SIRENA 'Efecto en la NUE y emisiones gaseosas de los inhibidores de la nitrificación'. Dr. Thomas Mannheim, Head of Global R&D EuroChem EuroChem Today Overview (1)MMT: million metric tonnes; (2)MER: minor element ratio. 2

EuroChem Agro Overview Product Portfolio From Standard Fertilizers to High-End Products 3 Development of world population and Nitrogen production from 1860 to 2000 6 Total Gesamt N 200 Global Weltbevölkerung population [Bill.] [Mrd.] 4 2 Weltbevölkerung Fossil Verbrennung fuels fossiler Brennstoffe 0 1860 1880 1900 1920 1940 1960 1980 2000 Jahr Haber-Bosch Haber Bosch Biologische Biol. N-fixation N 2 -Fixierung 150 100 50 0 Reactive Reaktiver Nitrogen Stickstoff [Tg N/a] [Tg N/a] Galloway et al. (2003) BioScience 53, 341-3564

N 2 O emissions global trends and sources 5 Fertilizer: Conflicts of objective. What should it do? Agronomical: Feed crops for high yield and quality Easy to handle Available at the right time with the right demand Right nutrient balance High agroeconomical value Environmental Low ekotoxicity, low toxicity High effieceincy, low losses (gaseous, leaching etc) low in contaminants Low energy input in production/transport. Socioeconomic: Low in side effects good reputation Climatic: Low CO 2 eq emissions Raw materials Production Logistics application 6

Energy consumption of synthetic nitrogen fixation CO2-Equivalent in CAN production Source: Fertilizers Europe 2015, EuroChem Antwerp 2015 8

EEF technologies in plant nutrition EEF technology in plant nutrition Chemical Physical Biological Standard skills: Active ingredients Physical diffusion barrier Granulometrics Biostimulants Solubility, Nitrification inhibitors Controlled release fertilizers Granule size distribution Microbes Chemical composition Urease inhibitors Sulfur coatings Micro granules Humic and fulvic acids Slow release technologies Polymere coatings Liquid/solid Plant and algae extracts and their combination! Mineral coatings 9 Definition of goals of EEF: Limitations of accepted additional costs for farmers Yield response Highly accepted Partly accepted Nutrient demand Partly accepted Not accepted Satus quo: No benefit, no add. costs for farmers Less nutrient demand, same yield: max add costs = savings in nutrients Less nutrient demand, higher yield: Max add costs = saves in nutrients + add yield value (Optimum) Higher yield, same nutrient demand: Max add costs = value of add. yield Higher yield, higher nutrient demand: Add costs limited by value of add. yield minus costs of add nutrients Lower yield, lower nutrient demand: Econ. losses in yield smaller than savings of nutrients Same yield, higher nutrient demand: not acceptabel Lower yield, higher nutrient demand: not acceptabel Lower yield, same nutrient demand: Not acceptable 10

EEF technologies in plant nutrition EEF technology in plant nutrition Chemical Physical Biological Standard skills: Active ingredients Physical diffusion barrier Granulometrics Biostimulants Solubility, Nitrification inhibitors Controlled release fertilizers Granule size distribution Microbes Chemical composition Urease inhibitors Sulfur coatings Micro granules Humic and fulvic acids Slow release technologies Polymere coatings Liquid/solid Plant and algae extracts and their combination! Mineral coatings 11 The economy: EEF cases: Effects on yield response Case 1: Enhanced efficieny by reducing nutrient losses Economy on base of safed nutrients Case 2: Enhanced efficiency by increasing yields Economy on base of additional yield value Case 3: Combination of Case one and Case 2 Economy based on both pillars Case 1 Case 2 yield Case 3 Nitrogen input

Case 1: Urease Inhibitors. Saves N. P (max) = P (N) * (1 EEF(t) (% )) P (max) = Max accepted price for EEF technology P (N) = Base price for nutrient in fertilizer EEF(t): Potential of nutrient savings Conclusion: EEF technologies which enhance nutrient efficiency by reducing losses must be very cheap and/or the potential losses must be very high to be accepted by farmers. Works for UI. But: What about N 2 O reduction technologies? 13 Economic evaluation Example Case 1: Calculation of accepted price for EEF: Urease inhibitors (UI) Assumptions: Yield constant. Same yield can be achieved by higher rate of urea-n or less rate of urea-n plus UI. Reduction of NH3-emissions: Average 15 %. Cost per kg Nitrogen (Urea) = 0,65 Cost per hectar (Corn) with 180 kg N = 117,4 Saving of nitrogen by using UI (NH3-Emission reduced by 16 %) = 18,72 /ha Investment share: 50 % for farmer, 50 % for industry and traders: Max. costs for UI/ha = 9,36 /ha Max additional accepted costs per ton Urea (for UI) = 28,50 Conclusion: Acceptance of EEF technologies at farm level depends on Base price of nutrient (e.g. Urea price) Efficiency of EEF technology (here: mitigation of NH3-N-losses) 14

Case 1: Nitrification inhibitors (Akiyama et al. 2010) 1,0 emissions without nitrification inhibitor; mean value and 95% percentile; amount of cited studies 1 Relative N 2 O emission (1,0 = fertilizer w/o Inhibitor) 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 85 42 Average EEF potential: 20% for Thiosulfate 10 8 12 All Nis DCD Nitrapyrin Ca carbide DMPP Thiosulphate Neem 4 Average EEF potential: 50% for DMPP 8 Effect of DMPP on the annual N 2 O emission in vegetable production 10 1 st year 2 nd year Generell N-Dünger- Produktion kg N 2 O-N ha -1 8 6 4-46% winter season cauliflower lettuce Cool Farm Tool Düngung und Minderung Fazit - 40% 2 0 -NI +NI -NI +NI Pfab, Palmer, Buegger, Fiedler, Müller, Ruser (2012)

N 2 O-Emissions after N application in the field with and without DMPP (ENTEC 26), whole year measurement 4 kg N 2 O-N ha -1 a -1 3 2 Control ASN ENTEC26 tillage tillage sowing 1 N-fert 0 Mrz/12 Apr/12 Mai/12 Jun/12 Jul/12 Aug/12 Sep/12 Okt/12 Nov/12 Dez/12 Jan/13 Feb/13 Mrz/13 Apr/13 Guzman-Bustamante, unpublished Nitrification inhibitors. Reduces N2O-Emissions. Max. add costs for CAN ( /to CAN) Price for CAN ( /to CAN) The maximum acceptable additional price for NI by N 2 O emission reduction varies between 0,40 1,60 /to CAN. The additional production costs of NI exceed the max. acceptable price by far. Reduction of N 2 O emissions won t be payed by farmers. Who else? 18

Example case 1: Cost of GHG Emissions (e.g.pasture) Total Costs ( /ha) 50 40 30 20 10 NI + NI NI + NI NI + NI Low Fertilizer Input (64 kg N/ha) Medium Fertilizer Input (180 kg N/ha) High Fertilizer Input (295 kg N/ha) Climate Cost Production Cost Heinrich und Janssen, Univ. Göttigen. Adapted from DLG Mitteilungen 4/2014 Production costs means: monetary value of N by N 2 O emissions for farmers Example case 1: Reduction of GHG Emission costs in pasture using NI Total Costs ( /ha) 50 40 30 20 61% Reduction in Environmental Costs (reduced GHG Emissions) using Fertilizer Inhibited with nitrification inhibitors (NI) 10 NI + NI NI + NI NI + NI Low Fertilizer Input (64 kg N/ha) Medium Fertilizer Input (180 kg N/ha) High Fertilizer Input (295 kg N/ha) Climate Cost But: Farmers won t be payed for using this technology only for GHG emission reduction because their costs are not covered! Production Cost Heinrich und Janssen, Univ. Göttigen. Adapted from DLG Mitteilungen 4/2014

The economy: EEF cases: Effects on yield response Case 2: Enhanced efficiency by increasing yields Economy on base of additional yield value Combination of technologies and synergistic effects are needed to shift the yield response curve P(max) = P (c) * 1 + EEF (y) (%)) P(max) = Max accepted price for EEF technology P(c) = Market price per unit of crop EEF(y) = additional marketable yield Case 1 Case 2 yield Therefore EEF technologies are more easily accepted in intensive crops but less in extensive crops Nitrogen input EEF technologies in plant nutrition: Acceptance EEF technology in plant nutrition Chemical CONCLUSION: Physical Biological Standard skills: Active ingrediants Physical diffusion barrier Granulometrics Biostimulants EEF technologies are only accepted by farmers if costs are Solubility, compensated Chemical composition by Controlled release Nitrification inhibitors Granule size distribution Microbes Slow release fertilizers technologies 1. Saving cost for nutrients 2. Additional yield or other positive valuable effects (quality, Chemical compositionmanagment) Urease inhibitors Sulfur coatings Micro granules Humic and fulvic acids If costs for high EEF technologies are not covered: For broader acceptance Slow release Polymere coatings Liquid/solid Plant and algae extracts technologies 1. Benefits for farmers must be granted by society or 2. Usage of common fertilizers without EEF technology must be restricted by authorities Mineral coatings 22

Conclusion Fertilizer today has not only to feed crops. It has to meet all ecological, economical, social and climatic demands simultaneously. And in addition: It has to be economical All EEF technologies are aligned with additional costs to the farmers. Additional costs to the farmers limit the accepance by the farmers. Benefits for the farmers are depending on the savings of fertilizer value and/or value of additional yield Savings of fertilizer value is related to price per unit nutrient and efficiency of EEF technology Additional value of yield is related to the market price of the crop and potential increase of yield If benefits for farmers > cost for EEF technology: Technology will be accepted by farmers. Additional benefits for society, environment and climate change mitigation are covered. If benefits for farmers < cost of EEF technology: Technology will not be accepted by farmers without economic compensation Additional benefits for socienty, environment and climate change mitigation have to be covered by society if wanted Only one technology will not be sufficient to meet market and social/politcal and economc needs. Parts of Industry will continue investment in development of new EEF technologies If EEF technology should be established to meet social, environmental and climate objectives as well s the agronomocal targets, it needs political support. 23 EuroChems Global R&D Strategy: Enhence nutrient efficiency in the field We have to challenge permanently ourselves to be a leading innovator in the fertilizer industry. Our target is to evaluate the market and looking for possibilities to better serve our customers with needed solutions and proven enhanced efficient fertilizers R&D is the anchor that provides the scientific base and creates the related knowledge to develop advanced fertilizer and plant nutrition technologies and support Premium Product Strategy. 24