Prices for nitrogen and phosphate fertilizers are reaching record highs in many places worldwide. Not only do the high production costs of nitrogen continue to count, export restrictions for phosphate, for example, are also noticeable.
Nitrogen fertilizer manufacturers in Europe are largely dependent on the price of gas. This has more than halved since the beginning of October, when Russia finally opened the gas tap to the European Union. On November 15, the futures market for natural gas recorded a price of €4,26 per MMBtu (1 million British Thermal Unit), while at the end of October that price was still well above €5 per MMBtu. A year earlier, €2,26 was paid. This means that the gas price remains relatively high.
Price records
A falling gas price is positive now that temperatures are falling and more heating is being used. It is highly questionable whether it will immediately solve the concerns of the fertilizer market. Looking at the global market, it continues to break record after record. Including in the US, Australia and Africa. In Europe we notice a little less of it at the moment. By the way, manufacturers are doing well in the current market turns out from their financial figures.
What is currently strongly influencing the world market is the export ban from China. It was the end of September clearly that the country will stop exporting phosphate fertilizer. Russia followed with their own more than a month later prohibition. In our country we do not notice much of this in a direct sense. We source our fertilizers from other countries. It is turning the market upside down worldwide. Urea and ammonium both reached record prices of $1000 per tonne or more. Prices that arable farmers in the US or Australia have to pay are now around $1300 per tonne or more.
The above countries are currently being hit hard due to their import dependence. For example, the US imports 20% of its urea from Russia. For ammonium nitrate this is even 40%. Australia is again highly dependent on China for phosphate and is now forced to buy product from Morocco, where Dutch phosphate also comes from.
Construction plan changes
Expensive fertilizer causes an increase in the cost price of cultivation and ultimately higher inflation (read: higher food prices). Farmers also adjust their construction plans. Analysts estimate that the area of grain corn - which requires a lot of nitrogen - will decrease by 1 million hectares in favor of soybeans. Arable farmers in Australia and Canada are also taking stock and opting for a different crop. Legumes are especially popular.
In the Netherlands it will probably not happen and growers will be forced to accept the prices. It is especially a problem to purchase fertilizer at all now that almost all suppliers have a mandatory purchasing freeze. Large volumes were recorded in advance sales that later turned out not to be available at all. Throughout Europe, advocates are sounding the alarm about a possible fertilizer shortage and the high costs associated with it.
Cost of potatoes
For ware potatoes on clay soil, fertilizer costs will increase by €270 per hectare next season. That figured the Consumer Potato Producers Organization (POC) recently made a cost price calculation. For nitrogen, the costs are expected to double. For phosphate and potash this is +30%. Given the current market, these percentages can be called cautious. If you calculate all price increases, the cost price is more than 1,5 cents per kilo higher ex-land. In storage on April that is 2 cents. For long storage (end of June) you are looking at a minimum sales price of €0,25, including margin for the grower.
What the situation will be like next spring remains to be seen. This partly depends on the course of this winter. Will there be a need for a lot of heating or could gas prices drop further? In addition, the global market has become fragile, to say the least, with two major export restrictions. That puts pressure on other destinations. Perhaps new major increases for nitrogen will not materialize for a while and it will now be the turn of phosphate or potassium.