Fertilisers should be a humanitarian commodity, says Keytrade boss
Series CEO spotlight,
Episode 14:
Melih Keyman, CEO of the Swiss fertiliser trading firm Keytrade, warns that the war in Iran is pushing fertilisers out of reach for those who need them most.
Founded in 1997 by four traders, Keytrade is based in Thalwil, near Zurich. The company acts as a one-stop shop for nitrogen, phosphorous and potassium fertilisers, with 11 offices overseas. It trades in more than 100 countries, with Brazil, the United States and the European Union among its largest markets. CEO Melih Keyman, a Turkish national, previously worked for the Turkish conglomerate ENKA and for Trammo, a leading commodity trading company, before founding Keytrade. He is currently in the process of handing over control of the business to his son, Ahmet Keyman.
In his 43-year career, Melih Keyman has weathered many turbulent periods, but none compares with the current moment. He is grappling simultaneously with China’s curbs on fertiliser exports, sanctions on major potash exporters Russia and Belarus, and tariffs imposed by the Trump administration on imports into one of the world’s largest fertiliser markets.
On top of this, the CEO warns that the Iran war and the ensuing blockade of the Strait of Hormuz has created an unprecedented situation for fertiliser traders and farmers alike. Swissinfo spoke to the Turkish-Swiss fertiliser trader about how geopolitics has upended what is basically a remarkably simple business model.
Swissinfo: What is the impact of the war in Iran on your business?
Melih Keyman: Prior to the war, we made the decision to stay away from the Arabian Gulf and focus on businesses elsewhere. It is important to know that the fertiliser markets were already tight before the war in the Middle East. Obviously, once a war starts it worsens the supply situation. So we made the right decision as a company to pull our positions out of Arabian Gulf and reposition them for example in Europe, North Africa, the United States and Brazil.
We have ended up benefiting from the war since it began because such a large supply of fertilisers coming out of the Arabian Gulf was no longer available in the market.
We made above-normal returns thanks to our decisions. If you had asked us a few months before whether we would achieve this result, I would have told you it was unlikely. We will beat our 2026 financial targets but will be behind in terms of the quantity of fertilisers traded. I don’t think we’ve had this little tonnage traded for this time of the year in 15 years. So, our turnover will not be that much higher than expected because the quantity traded is so much less than normal.
Swissinfo: You made these decisions slightly in advance and you have been able to weather the storm. But are you able to continue trading?
MK: Yes, we have benefited from this storm. But of course as the prices have risen to spectacularly high levels, now our thinking has started moving defensively. We’ve stop buying and instead we’re selling what we have.
We even joke that we should close the office until September, not make any mistakes, and then prepare for the spring season. When the markets move up this fast, the collapse is also dramatic. So, you may lose a lot of money if you are not careful. I guarantee there will be a cliff.
Swissinfo: How are you hedging future risks?
MK: The fertiliser business is highly illiquid and highly unsophisticated. Our volumes are very small compared to other commodities like grains, energy and metals. So the price discovery [a competitive process of determining a fair price at a given time based on market knowledge] in our business is a problem.
We do not have futures markets where hundreds of people are buying and selling fertilisers. We have some so-called “paper markets” where contracts are traded instead of physical commodities but they are small. So we cannot hedge our positions the way you can hedge other commodities.
And that’s one of the reasons why large trading companies such as Glencore are not participating in the fertiliser trade because it doesn’t fit their risk profiles. These big trading firms are taking far larger positions than we do in financial terms, but they always have the ability to hedge them. And in our business you are completely exposed. You must have a very strong stomach to be a fertiliser trader.
Swissinfo: Have you seen such a shortage of fertiliser in the market in your 43 years in the business?
MK: Absolutely not. That’s why I cannot imagine what the consequences may be if this war lasts until the end of the year, for example. I have been speaking to the grain trading companies and the grain markets do not see the worst-case scenario. They are assuming that the war will be handled within a brief period.
Swissinfo: The fertiliser industry was already under a lot of pressure with major potash exporters Russia and Belarus facing sanctions. How are traders dealing with these legacy issues?
MK: You cannot stop a commodity from being traded even when a country is sanctioned. Sanctioned countries always find ways of selling their products. But I have a point to make: sanctions on fertilisers are a dangerous game to play. I have appealed to the United Nations and to our fertiliser associations that we should work hard to include fertilisers as a humanitarian commodity that cannot be sanctioned.
They help feed the world, and when you take that away from the growers, you don’t only play with their livelihoods, but you also endanger grain production or food production globally.
Swissinfo: China has restricted fertiliser exports since 2021. Do you expect them to now come to the rescue?
China is constantly concerned about producing enough food for their large population. Their farms are not as big as those in the US, Brazil, Argentina or Canada where you can utilise technology to the maximum. The country is also not so lucky with the quality of its soils. So their yields are typically much lower and they need more fertilisers.
When I started fertiliser trading in 1997, my biggest business was to sell fertilisers to China. Then suddenly, we found that they had quietly built their own industry, banned imports of fertilisers and started exporting them. Our China office, which we opened in 1999, was built to sell to China. But now that office is exporting out of China. Our business there goes up and down as the Chinese government decides what to do. Right now, with the war going on, they don’t want to export their fertilisers because their government is focused on domestic demand.
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Swissinfo: So, should farmers buy fertiliser now instead of waiting for the prices to drop?
MK: Normally you ship fertiliser in summer for the following spring planting season. Then the second wave of selling happens early first quarter of the year for second quarter applications. That cycle has stopped.
Over the last few years, a new long-term trend of last-minute buying has established itself due to price volatility and high interest rates on loans. Farmers are waiting until the last minute to buy what they need.
When farmers pull out of the fertiliser market, they all pull out together. But when they return, they all return at the same time. Then that oversupply of fertilisers suddenly turns into a shortage.
This year is particularly problematic because of the war in Iran. But overall the fertiliser market has been getting fundamentally tighter even before the Iran war. Growers must hedge their risks and have some sort of inventory.
Swissinfo: Do you think farmers will pay a higher price this year for waiting until the last minute to buy fertiliser?
MK: The current spring planting season is slightly less problematic because before the war fertiliser supply was adequate. So, for the current season there should be enough fertiliser available for the growers. My worry is summer onwards.
In summer, we prepare for the big phosphate demand in Brazil. So, if the sulphur does not come out of the Arabian Gulf and, as a result, if the Chinese cannot produce enough phosphate fertilisers to export from June, the latest by the first half of August, we will face a big problem. The soybean yields will go down dramatically. And then in the fall, we have to start worrying about North American nitrogen and phosphate demand. I really don’t know what is going to happen.
Swissinfo: And what about Switzerland? Is the country also a hub for fertiliser trading like other commodities such as metals and grain?
MK: No, it is not like grains or energy trading. We had all the Russian fertiliser traders based here, but after the sanctions they all left for Abu Dhabi and other places.
Even at the global level we unfortunately do not have as many fertiliser trading companies as we would wish. Today, there are only three or four companies that are global.
We have three main barriers to entry: the limited number of experienced fertiliser traders available, the low volumes and the lack of hedging possibilities.
Another barrier is that fertiliser trading is a very relationship-based, old-style of trading. We don’t trade on computer screens. We travel around the world to meet suppliers and build relationships. We do business with people we like and who like us. In my 43 years in this business, I don’t recall many newcomers who came and made it work.
Swissinfo: Is it still an advantage to be based in Switzerland?
MK: This is the best place to be. I cannot imagine a better location than Switzerland to be running a global commodity business. There are so many advantages of being in Switzerland.
First, our only assets are our people. We don’t own factories or ports. So, we need the best quality people. And to bring the best quality people you have to provide them with the best quality environment in terms of safety for their families, healthcare and access to whatever they want.
We’ve been approached by Singapore and other places like Dubai but why would we move? Because we’re going to save a few percent in taxes? We get back value for the taxes we pay in Switzerland and we are fine with that.
Swissinfo: How do you see your business developing in the future?
There’s so much innovation happening in the AgTech and precision-farming space. Our fertiliser business will not look the same 15 to 20 years from now. We do not want to remain a fertiliser seller. We want to be a company offering solutions to the growers.
The key is to increase the efficiency for the farmer. And it’s not just about offering fertilisers, there’s also plant nutrition, hardware, software, autonomous tractors and spraying. We already have investments in those areas.
More
How the war in Iran is affecting the Swiss food industry
Edited by Virginie Mangin/sb
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