The fertilizer market is already at an extremely high price point, but this could get much worse, UK insiders believe. An export blockade from Russia and Belarus for fertilizers, shiploads that are refused in Europe and of course the gas prices. All price driving factors. A sharp increase is also realistic in the Netherlands.
The British newspapers Telegraph and The Guardian write about developments in the fertilizer market. In the United Kingdom, prices are exploding and suppliers have now declared a trading halt. This concerns ammonium nitrate, which is not used in the Netherlands, but is used in enormous quantities elsewhere in the world. The price at Yara was more than €800 per tonne (£670) at the end of last week. Competitor CF Industries has now withdrawn the price of their AN fertilizer, followed by Yara.
€1500 per tonne
Suppliers are expected to come up with new prices at the end of this week. Farmers must brace for unprecedented price increases. In the UK, the ammonium nitrate price had already risen year-on-year from €318 to €780 per tonne. Insiders tell the newspapers Telegraph en Guardian that a price level of €1.200 will be announced and that even a level of €1.500 is considered possible in the near future.
Sources at both suppliers report that British factories may have to close temporarily because at such price levels there are simply no buyers left. Even at the old price level, it was difficult for farmers to finance its use. Factories are afraid that they will soon have very expensive fertilizer in stock for which there are no buyers. On the other hand, failure to deliver may have a major impact on their market share.
Pain in spring crops
According to the unnamed sources, the pain is mainly affecting spring crops such as potatoes and corn. The winter grains and rapeseed have already had some of their fertilizer and supplies are usually available on the farm. The question now is to what extent the high costs can be passed on in the product price and thus ultimately in the price of food for the consumer.
Another problem that suppliers face is the lack of deliveries. For example, fertilizer no longer leaves Russia - which controls 13% of world trade - and potash from Belarus. Russian ships that were already underway at the time of the blockade are no longer welcome in British ports. At least two fertilizer ships en route to the UK have headed for France. Russian LNG has also been banned from British ports.
Large shipowners such as Hapag Loyd and Maersk no longer sail to Russian ports with container transports. This means that goods do not leave for Europe, North and South America. Russia supplies more than a quarter of the European need for urea and phosphate. In addition, one fifth of the potassium requirement.
Pain for Brazil
Brazil is the largest customer of Russian fertilizer. Almost half of all potash comes from the country, 20% of urea and 13% of all phosphate. The country was actually discussing the supply of fertilizer, but had to suspend those discussions. The country now has to look to other countries for the supply of NPK fertilizers. The cultivation of soy, corn and coffee beans, among others, are the hardest hit.
Scale down production
According to the British trade association NFU, farmers in the country are anticipating the situation by sowing more hectares to compensate for a lower average yield. Alternatives such as digestate from biogas plants are also being sought. The country produces 40% of its fertilizer needs itself and imports the rest. With rising gas prices, it is feared that production could be hit again, as happened last year. This also endangers the production of CO2. The supply of this is currently protected by a special agreement. That lasts until May.
It is unclear what current developments in the fertilizer market mean for the Netherlands. Our country does not import fertilizers from Russia. In any case, not for your own use. Ammonium nitrate is not used here. The strongly fluctuating one gas prices have an irrevocable effect on fertilizer prices – here too. Kai Kikkers, CEO of fertilizer distributor Triferto, calls a price doubling unheard of. At the same time, he mentions that in today's times the impossible also becomes possible. "Everything depends on the gas supply and prices in the longer term. In our country, the course of spring also plays a role. Will we get four weeks of dry weather? Then physical demand will decrease."
KAS price up 33%
Kikkers notices that all market developments of the past six months are currently being extrapolated since the Russian invasion of Ukraine on February 24. "That gives the market an uncertain sentiment. The fact is that the price of KAS, for example, has risen by about €200 per tonne since the raid to levels around €800 per tonne. An increase of 33% in twelve days is incredible. Especially when you consider that we were already at a high level."
The situation at Triferto is also assessed on a daily basis in view of the developments. "It is important for us and other sellers what the stable price level will be after this peak is over. No company has seen the current increases coming and was able to anticipate them. I think that this will mean that the price for end users will anticipate gas prices much sooner. "It remains important to keep calculating. Whether a supplier gradually increases the price depends on their stock position."
Gas price determines
The CEO expects this madness to hit the fertilizer market in the next four to six weeks. "Ultimately, the gas price sets the floor for the fertilizer price," he thinks. "If the supply of Russian gas stops, this bottom will probably be at a sky-high level for a longer period of time. In addition to gas, fertilizer can also be produced from ammonia. Ukraine has a large transit port for ammonia in Odessa, making it the ammonia hub of Europe. Exports via the Black Sea have now virtually come to a standstill. Ammonia remains available, but the price is also high and volatile.