Fertilizer prices have risen sharply. Manufacturers point to the sharply increased energy costs, high international demand and increased transport costs. Critics say that's not the full story. The European farmers' interest group Copa-Cogeca argues that there is insufficient competition due to anti-dumping measures.
Copa-Cogeca believes that rising costs alone cannot be the cause of the sharp increase in fertilizer prices. The anti-dumping measures introduced by the European Commission in 2019 play a crucial role and have seriously disrupted the market, the organization said.
Import tariffs on fertilizer were imposed at the insistence of the fertilizer industry, to prevent companies from the US, Russia and Trinidad and Tobago, among others, from competing away from the European industry. American producers are also pushing for market protection in the US due to unfair competition from Russia. The market protection measures may be good for the fertilizer factories, but they are very detrimental to European farmers.
Prices doubled
UAN (urea and ammonium nitrate) prices have doubled compared to 2017/2018, the reference year for the dumping practices, and fertilizers have become on average 2021% more expensive since the beginning of 25. To make the situation even more complicated, some European fertilizer producers are now forced to scale down production or even temporarily close factories due to high production costs, according to Copa-Cogeca.
For example, fertilizer manufacturer CF Industries announced last week that it would close 2 of its 4 production locations in the United Kingdom and the Norwegian Yara announced that it is cutting ammonium production by 40%. Both companies say that the high gas price and limited gas supply are the cause of these draconian measures. Natural gas accounts for approximately 60% to 80% of the production costs of nitrogen fertilizers. When production will be running at full speed again depends on further market developments.
Too little competition
According to Copa-Cogeca, the import restrictions have limited competition and strengthened the dominant position of manufacturers. The anti-dumping measures alone cost European grain growers €210 million per year. In European terms, fertilizers account for approximately 40% of the directly attributable costs in grain cultivation.
Given the significantly changed market situation, the grounds for market protection have disappeared, according to Copa-Cogeca. "Now that fertilizer manufacturers are announcing that they are reducing production of nitrogen fertilizers, we desperately need fertilizer from outside the EU," writes Tim Cullinan, chairman of the Irish member of Copa-Cogeca IFA. "The anti-dumping measures are now only causing costs on the farm to skyrocket."
Protection remains necessary
However, the European fertilizer industry continues to believe that protection is needed. For example, they point out that Russian nitrogen producers have a huge advantage due to the approximately 20% lower natural gas prices in the country. In addition, international competitors are not bound by European standards for CO2 emissions and other environmental measures that increase cost prices.
The European Commission can (temporarily) lift the anti-dumping measure if significantly changed circumstances give reason to do so. The Commission has not yet announced whether this will actually happen.
Further price increases are obvious
Predicting is difficult, but the signs on the fertilizer market are unfavorable for the farmer. The price of gas has risen sharply in recent months and this normally affects the price of nitrogen fertilizer with a delay of approximately 3 months. By scaling back fertilizer production, there is still some shortage in the market. Due to the relatively high grain prices, there is also a high international demand for fertilizer. If the European Commission decides to lift market protection, it remains to be seen whether this will result in a lot of additional fertilizer coming onto the market.
Geopolitical developments also have a major influence on the market. The production of potash and phosphate in particular is often closely intertwined with international trade policy through state mining companies. For example, the sanctions against Belarus not only affect Lukashenko's regime, but also affect potash exports, which in turn has direct consequences for European farmers.