Fertiliser merger a "marriage waiting to happen"

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This week's announcement that the country's two major fertiliser suppliers Yara and Terra are to merge is hardly a major surprise.

Since Yara took over Kemira in 2007 and became a joint venture partner with Terra in GrowHow, many in the industry have considered it just a matter of time before the companies cemented their relationship.

fertiliser blog.jpgYara has always been seen as "acquisitive" and eager to grow its 7% share of the world market to something in double figures - and this takes it another, significant step on the way.

It is understood that the planned merger with Terra will give it 9% global market share.

More importantly, it will also give the combined group a 30% stake in the US market and this is where Yara sees the greatest opportunity for growth and profit.

But what will it all mean for British farmers....

Predictably enough, there has been a degree of unease at what the effects on competition will be, with just one company controlling the country's entire manufacturing capacity, and that same company also controlling a significant share of the import business.

One farmer was particulalry blunt about it this week. "They already have us over a barrel, so I can't see how it will make any difference. Either you pay Yara's price or you go without - end of story!"

I can understand his scepticism - especially given the farming industry's experience in 2008 with yo-yoing fertiliser prices.

But the fact is, the UK fertiliser business remains extremely competitive, with reasonably transparent pricing and plenty of different product available from a range of sources.

Apart from that, fertiliser prices are determined globally - with things like the price of gas and exchange rates exerting the greatest influence.

And, as our Input Price Monitor reveals on a monthly basis, the price farmers pay on farm are frequently well below the manufacturer's recommended retail price, with discounts often available, especially for those who group together and order in significant volume.

Yara claims that, following its merger, there will be significant cost savings achieved from synergies. While this is more likely to be used to increase the company's margins that reduce prices to customers, the fact remains that the fertiliser business is a global one, and farmers should not have too much to worry about from this latest consolidation.

* Regular readers of this blog might have noticed a lack of postings in recent days. This has been attributed to the fact that I've been moving house, covering for absent staff and having to deal with an emotionally unstable laptop for the past two weeks. Apologies for any disappointment this may have caused (!) and normal service will be resumed next week.

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About this Entry

This page contains a single entry by Philip Clarke published on February 17, 2010 5:03 PM.

Extolling the virtues of peas and beans was the previous entry in this blog.

The joys of farming conferences explained.... is the next entry in this blog.

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