If you look at the prices of nitrogen fertilizer, you can say that this market has finally entered calmer waters. However, the bottom price does not seem to have been reached yet. Prices for fertilizers containing potash and phosphate are still falling steadily and will remain so for the time being.
Fertilizer prices have stabilized in recent weeks and, in contrast to spring 2022 and the past winter months, have only moved little. However, compared to 2 years ago, the market is volatile.
The difference is in the demand for fertilizer, which has not recovered and remains far behind compared to other seasons. Arable farmers and dairy farmers continued to postpone their purchases as a result of the declining market. They only purchased the minimum, sometimes even only the volume they needed for that one application moment instead of for the rest of the season. The supply of fertilizer therefore remained ample.
Due to the volatile prices, the wholesaler also adjusted its purchasing methods. They purchased significantly smaller inventories due to the rapid price drop, to avoid the risk of overpriced inventory. "At one point you could call it day trading," says a buyer.
Bottom price not yet reached
This method of purchasing is still used by wholesalers and ensures that prices differ every week. Compared to two years ago, the market is still certainly volatile. Arable farmers and dairy farmers continue to purchase minimally – despite the low, stable price. Supply and demand are now closer together than before, but the supply of nitrogen fertilizer is still ample. Because sales of nitrogen fertilizer in Europe are continuing quietly and the price has already fallen considerably, the market appears stable. But if the application times on the plots are over this summer, this could still cause further price pressure on the fertilizer market, according to the trade.
At Farmers4All, the price for KAS fell again last week by €1,50 per 100 kilos. As a result, the price now stands at €31,30 per 100 kilos. 3 weeks ago the price took a small step up for the first time. Kali60 fell by €5 last week, but remains the same this week at €69,80 per 100 kilos. Triple superphosphate 45% is charged at €77,30 per 100 kilos.
The fact that prices are stable does not mean that the market is calm and there are few developments. There is still uncertainty due to various factors. One of these is the natural gas market, which made exceptional leaps last week. Natural gas is the main ingredient of nitrogen fertilizer. Many European fertilizer producers imported cheaper ammonia from other parts of the world due to high natural gas prices. Ammonia is currently competitively priced on the world market due to oversupply, but the cards have now been shuffled again as the natural gas price even fell below €25 per MWh last week. Due to the lower price, European fertilizer producers may consider boosting ammonia production themselves.
Natural gas price
As an important raw material, natural gas determines a large part of the final fertilizer price. Fertilizer producers only benefit from stable, lower natural gas prices, otherwise the risk of expensive fertilizer production becomes too great. They want to prevent fertilizer sales from lagging behind again and being left with expensive stock.
Last week it became clear again that this market is unstable. Natural gas traded at €2 per MWh on the Dutch TTF Gas Futures on June 23,60, but after the weekend on June 5 it reached €28,40 per MWh due to higher demand for LNG (liquid gas), mainly from Asian countries . In addition, it remains a guess what awaits us in Europe next winter with the gas supply. A cold, long winter will increase gas consumption and have a price-raising effect, very different from this mild winter when gas supplies are well stocked. In addition, traders expect that the supply of ammonia on the world market will remain high and competitively priced for the time being. There must first be a significant increase in the demand for ammonia somewhere in the world, or exports will suddenly become difficult, for which there are currently few signals.
Although fertilizer producers benefited from the high fertilizer prices in 2022 and wrote dark green figures, this could turn out very differently in the coming years with the volatile gas price and the changed purchasing strategy this spring. Given the falling fertilizer prices and significantly lower sales, the annual figures of fertilizer producers will look different than last year.
Ammonia pipeline
Russia and the situation in Ukraine also have a major influence on the global fertilizer market and the natural gas price. Previously, a lot of ammonia was exported to Ukraine and Europe via pipelines and other means, but this has come to a standstill since the Russian invasion. The pipeline alone produces 2,5 million tons of ammonia per year.
The Kremlin has been calling for the reopening of this pipeline for months and now lists this as one of the conditions for extending the grain deal with Ukraine that expires in July. If the influx of ammonia resumes, it could provide more supply on the European and African markets. Ukraine is now considering restarting the pipeline in exchange for an expansion of the grain deal with more ports and raw materials, Reuters news agency reports.