Insight into the best moments to buy fertilizer

As an arable farmer or livestock farmer, how do you deal with the rising prices of fuel, crop protection and natural fertilizers? Is it still possible to apply fertilizer? And what will the prices do? These questions concern many entrepreneurs. There is no ready-made answer, but we can provide insight into market developments in the field of fertilizer. In addition, we provide practical guidelines on how risks can be limited.

In this article, we provide insight into three burning questions:

• Can it be applied from nitrogen fertilizer?
• Is it wise to wait for a lower fertilizer price?
• And what is the best fertilizer purchase policy?

Saving on fertilizer costs €74 per hectare
Even at higher prices, fertilizer remains a good investment that pays for itself. Suppose you apply 25% less nitrogen fertilizer on grassland. Normally, for example, 11 tons of dry matter would be harvested on an annual basis. By applying 25% less nitrogen fertilizer, this becomes 9,9 tons. This gives a lower total protein yield, which has to be compensated with, for example, soy.

This calculation example is based on a constant protein content. By applying less nitrogen, this will probably be lower. The cost of compensating for the protein deficiency will only increase.

With the current prices for fertilizer and soy, 25% less nitrogen fertilizer costs €74 per hectare. The example is detailed in the table below. Where you think you can save, you create a cost item.

Fertilizer also profitable for arable farming
Arable farmers cannot avoid spreading fertilizer either. The prices of the end products are rising along with it. It is therefore wise to calculate, similar to the grass example above, what saving on fertilizer would cost you in terms of yield and quality at the applicable price. You will most likely conclude that it is sensible for your company to spread nitrogen fertilizer. Below is an example calculation for winter wheat with a yield of 8 tons per hectare.

It is clear to see that the net turnover is therefore increasing due to the higher wheat prices. The use of fertilizer is therefore still profitable.

Gas and fertilizer price developments
The gas price has a direct and major influence on the production costs of fertilizer. The course of the gas price was erratic at a high level in the past month. In the week of June 10-16, the gas price rose by 45%.

The course of the gas price is currently largely influenced by developments in Eastern Europe. In addition to sentiment, there are also concrete consequences. For example, Gazprom has announced that 60% less gas will be pumped through the Nord Stream I pipeline. The official explanation is that there are technical problems with the Portovaya compression pumping station.

Another cause of the price hike is an explosion at an LNG facility in Texas. Freeport LNG, the owner of the facility, has announced that it will be unable to deliver for three weeks. Just when LNG is important for Europe due to a limited supply of natural gas.

So there are several factors that can affect the price unexpectedly. In addition, the prices of, for example, wheat are rising. This ensures a continued high demand for nitrogen fertilizer worldwide.

We don't have a crystal ball, but with these facts in a row, it is expected that the price for nitrogen fertilizer will continue to fluctuate due to the uncertain market. This expectation that many farmers express that the price will fall drastically seems unfounded due to the persistent worldwide demand for nitrogen fertilizer. So price fluctuations at a high level.

Purchasing policy: risk diversification is the most sensible choice
We now know that applying nitrogen fertilizers can also be achieved at a higher price level. In addition, it is also clear that the expectation that prices will not fall drastically, but that they will continue to fluctuate considerably. What does that mean for your nitrogen fertilizer purchasing policy?

Various conversations have shown that many farmers are waiting for a good moment (read: low price) to buy fertilizer. However, that right moment often does not come in time; this would mean that fertilizer is purchased just before spreading. That's the same time the demand is highest. Naturally, as a dairy farmer or arable farmer, you want to purchase fertilizer at the most favorable price. In the past season, a few succeeded, but most did not.

The best way to capitalize on this uncertain market is to spread the risks. As an entrepreneur, you know where you stand. With this you secure your stock of fertilizer, as one of the most important production factors, and you avoid being forced to buy at an inconvenient moment.

Similar is how potato and onion growers sell their product. Many of these entrepreneurs partly grow under contract and partly sell on the free market. They can make a big hit, but first ensure they have a basic income. It also provides the financial security to be able to invest in the next growing season.

This strategy can also be applied when purchasing fertilizer. The advice is to buy a third in the summer, a third in the winter and a third just before the season.

summarizing
Investing in nitrogen fertilizer yields returns. Prices are expected to fluctuate at a high level. It is therefore important to spread the purchasing risk. A strategy is a third in the summer, a third at the end of the year and a third just before the season.