Global Commodity Shocks and Fertilizer Price Dynamics

This paper examines fertilizer price dynamics within a global commodity market framework. Using a panel of 65 monthly commodity price series from 2000 to 2025, we document three empirical patterns: fertilizer prices exhibit event-driven volatility, price responses differ across nutrients, and fertilizer prices increasingly diverge from agricultural commodity prices during major shocks. To quantify these patterns, we estimate a dynamic factor model that decomposes fertilizer price movements into global, block-specific, and idiosyncratic components. The estimated global factor is closely associated with standard indicators of global economic activity, indicating that common macroeconomic conditions are reflected in fertilizer markets. However, the transmission of these shocks differs across nutrients. Nitrogen fertilizers are more closely linked to energy markets, phosphate fertilizers show larger idiosyncratic variation, and potash reflects both global and sectoral influences. These results suggest that fertilizer price dynamics reflect both common global forces and nutrient-specific factors.