Fertilizer costs are rising enormously. Prices sometimes rise every quarter of an hour, a trader sighs. It is precisely the autumn months that are used to stock up for next season and to build up stock. Is that really smart now that the fertilizer market is exploding?
The term 'fertilizer bomb' takes on a different meaning at current market prices. The price has been since this summer on the rise but has almost exploded in the last seven days. Cooperatives and other suppliers normally use the fall months to offer early sales arrangements. This is currently very difficult because price increases follow each other at a rapid pace and stocks are thin.
Minimum purchase
Many entrepreneurs – mainly arable farmers – are currently on the seesaw. Order now, be sure of what you get and face further increases? Or sit out the dance and only take action in the spring? The latter is difficult for those who already have to get started in January or February during the first fertilization of winter cereals or flower bulbs. Some companies therefore choose to purchase a minimum quantity. Others choose to do a lot of business now with the idea that the increases are far from over.
Inquiry by Boerenbusiness reveals striking differences. Prices are rising everywhere, but large fluctuations are noticeable between suppliers and the different parts of our country. For example, arable farmers in Flevoland quote prices of around €45 per 100 kilos for KAS 27%, while an arable farmer in North Brabant says that they do business for €38 per 100 kilos. Prices have often increased by €10 in a week.
Such differences are also noticeable with the liquid nitrogen fertilizer NTS (27% N). Current amounts are mentioned there that range from €38 to €55,50. It is therefore worth asking and comparing! Suppliers who have purchased in a timely manner can offer fertilizers at more favorable rates, but there are concerns about delivery. This is because considerably more is sold than purchased.
Not just nitrogen
Nitrogen in particular is currently subject to price increases. However, phosphate and potash fertilizers are not excluded. For example, China announced last week that it would cut the export of phosphate fertilizers forbid. This has a disastrous effect on the fertilizer market. Details about this ban are still vague. Sources within the ministry speak of a ban until at least June 2022. There is currently already talk of export regulation by the government. Export data shows that the country exported a quarter less than average in August. This is despite an increase of almost 50% in the first eight months of 2021.
Crop farmers in South America are particularly affected by these export restrictions and bans. These also apply to plant protection products, especially glyphosate. Phosphate from Morocco is mainly used in Europe. This is the largest supplier worldwide.
Gas price leading
Back to the key question: Buy now or wait? The common view is that prices will only continue to rise as we get closer to winter. After all, gas consumption is rising and that is what is driving the nitrogen increase in a direct sense. Reason for Yara to reduce production by at least 40% – including in Sluiskil – due to the sky-high gas price. Yara has now increased the price of KAS to €45 per 100 kilos. If energy prices continue to rise, factories have no choice but to lower their production levels. Reselling gas yields more than producing fertilizers.
There are several reasons that drive up prices. For example, there is skewed growth due to a anti-dumping measure which the European Commission installed in 2019. The idea is that if the EC drops that, fertilizer prices can also fall quickly. If the energy market becomes more balanced, this can also stabilize the fertilizer market. The question is whether you as a grower should gamble on this. The motto is 'better too expensive than not to get'. If prices fall again, it will at least not be until the spring. This also depends on the season. Will we get a cold spring (high energy consumption) or not.
Bubble
A doubling or tripling of the fertilizer price has enormous consequences for the cultivation costs in the coming season. On Wednesday, October 6, the most active wheat contract on the Matif futures market closed €5,50 higher at €268,25. Grain prices are now being fed indirectly by the fertilizer increases. This bubble has to burst at some point, but the question is when and with what consequences.
In the Netherlands there is still a relatively large availability of organic fertilizers such as slurry. These will undoubtedly play a greater role next spring as an alternative to fertilizer. This in turn has consequences for the trade in these fertilizers. The arable farmer may have to dig into his pockets next spring to get slurry instead of money. At the same time, burning valuable chicken manure (phosphate) can also be disastrous if the export tap is turned off.