Fertilizer prices fell sharply last week. This is partly due to the high prices charged by manufacturers for nitrogen fertilizers in particular. This reduces the demand for fertilizer.
The settlement price for the June ammonia contract in Tampa, Florida was $1.000 per tonne. A month earlier, that price was 30% higher at € 1.425 per ton, according to market agency Green Markets, which is part of Bloomberg. This is a significant decrease, but ammonium remains 87% more expensive compared to the same period a year earlier.
High fertilizer prices in April and May have partly caused demand for fertilizer to fall, according to Green Markets analyst Alexis Maxwell. In some regions such as Southeast Asia, customers were unable or unwilling to pay the record prices. In addition, the analyst also points to the falling European gas price in the second quarter. As a result, the production costs for nitrogen fertilizers have fallen sharply. This does not mean that all problems in the fertilizer market have been solved, however. The supply and logistics chains have been severely disrupted and this still leaves deep marks on the global market.
What is left for the farmer?
The high fertilizer prices meanwhile have a major impact on the earning capacity of agricultural companies. Joe Outlaw and Bart Fischer of the Agricultural and Food Policy Center (AFPC) at Texas A&M University recently calculated that fertilizer prices have risen by 133% in one year. Rising costs weigh more heavily on the current account than the increased grain prices. A representative US grain company is heading for a net cash flow reduction of $399.000 this year from a year earlier according to AFPC calculations. For a representative company with feed grain (maize) and oilseeds (soy) that rises to $534.000 less cash in the bank compared to a year earlier. Farms where rice is the main crop are hit hardest. They see their net cash flow decrease below the line by $880.000.