Global issues impacting fertiliser markets

David Barrett, Director of Fertiliser at McCreath Simpson and Prentice, looks at the global issues affecting the current fertiliser prices.

It’s been an eventful few months in the fertiliser markets, with many factors in play increasing prices and reducing availability. Many MSP customers are considering how best to manage inputs for the months ahead, so let’s look at the global issues that are having an impact on prices and what this means for trading conditions for the future:

    • 300,000tns/month, of Iranian Urea has been excluded from the market due to new sanctions. This is a significant amount and has led to a shortfall in supply resulting in a higher demand. Urea prices have increased 33.5% on same period last year i.e. $71. We accept UREA prices are often volatile, but all data suggests prices will not ease, especially in the short to medium term subject to an Indian tender in August/Sept.

 

    • China has become a net importer as opposed to exporter due to the closing of inefficient and environmentally damaging plants. This is a new position for China and has taken out global capacity.

 

    • New global capacity has failed to come on stream, and increased demand from South America, such as Brazil, has only exaggerated this issue. Basically, this has led to no surpluses to drive down prices. New plants can take 5 years from digging foundations to commissioning to eventually producing, and although these are in construction (in Qatar,US & Canada) they have not come into production this year.

 

    • In India, the Government tender for fertiliser products on behalf of all farmers, and this process has an annual effect on the markets at this time of year, reducing availability and driving up prices.

 

    • Currencies also play an important role in gate prices in the UK, and a proportion of the increased prices can be contributed due to poor exchange rates.

 

    • The new season price of Ammonia Nitrate is currently up 14.3% compared to the same period as last year to this i.e €30. European demand has restricted supplies to the UK, continuing to push prices up further. In particular, we have seen an increase of exports from a national domestic manufacturer to the Baltic states.

 

  • Phosphate: DAP prices is up 27.5% on same period as last year i.e. $95. There has been an increased demand from industrial use, (Phos Acid), without an increased supply from new mines (which are not being developed). It’s difficult to see where new suppliers will come from, as this market is high risk with the EU introducing restrictions on Cadmium levels on phosphate sources. This increases the reliance on existing suppliers (mainly Russian) and will limit future supply.

So, to sum up, global demand for fertilisers is increasing whilst supply is static and reducing in some instances. This has resulted in noticeably higher prices in 2018 which will continue for the foreseeable future. I strongly advise a planned approach to farm purchases, spreading the risk and working with MSP specialists to lock in prices. With so many unknowns in the marketplace just now, financial planning is crucial and knowing your input costs for the year ahead could prove vital for your business.

Call 01289 330022 for more information.

*Exchange rate of £1=$1.31

** Exchange rate £1 = 1.12Euros