Fertiliser buyers face a big spring price rise:By Sam Fortescue
FARMERS BUYING fertiliser in January are facing prices as high as £157/t for ammonium nitrate and spring prices are still unpublished.
Rocketing forward gas prices mean that production costs in the New Year are unknown, and could come in even higher than January. Urea prices are also high, at £200/t for granules and £210/t for prills.
Existing orders are being produced for less than 30p/therm, but the January forward gas price has been as high as 80p/therm. Producers claim that volatility has made it impossible to price ammonium nitrate for the crucial months of February and March, with each extra penny per therm adding £3/t to production costs.
Market regulator Ofgem has stoked the rise by saying that industrial users could be cut off from one day to the next if there is a cold winter, in order to keep residential customers supplied.
Robin Cattermole, managing director at fertiliser manufacturer Yara, said spring prices would fall in the range £160-£170/t for ammonium nitrate. But he warned that this price was designed to attract buyers now, and could easily rise later in the year. Nitrogen shortages could also mean that large tonnages of non-compound fertilisers were hard to obtain.
Kemira’s spring prices could also soon be published, said commercial manager Ken Bowler. “We have been hesitant about selling too much up front because we are unsure about our winter cost structure. We may well issue prices through to March, but only for a given quantity.”
Opinion is divided on how many farmers will be affected, but consultant Roger Chesher believed that many had yet to buy fertiliser. “There is very little arable in my estimation, but around 45% of the grass market is still to come. The biggest unknown is how big this year”s market will be,” he said.
High prices coupled with the need to trim milk production to remain on quota could put dairy producers off altogether, said Mr Chesher. “There is potential for farmers to say we’ll wait for July”.”
The outlook for summer 2005 is better, although prices are forecast to remain high. Farmers could expect AN to fall back to about £120/t in July, said Mr Chesher. “Fertiliser producers are anxious to stimulate sales when gas is cheapest, so expect a come-on price in July. Anyone who can buy then should do so, but expect a sudden cut-off of cheap prices when order-books are full.”
The global squeeze on supplies would keep AN prices in an annual range of £115-£160/t until at least 2007, he said.