Urea prices dropped dramatically this week from $800/t to $360, first in North Africa and then further afield, writes Roger Chesher.

The fall was partly a reaction to the ongoing financial turmoil, but also because global demand for urea has largely dried up at the end of the usage period, leading to excess production. At the same time, India is tendering for 1.5m tonnes, leading producers to compete aggressively for business.

At $300/t, urea will not meet the cost of production, leading to speculation that such low prices cannot last.

To date, the impact in Europe has been minimal because the urea market is largely satisfied. Current deals are secured on a contractual basis, and the nitrate business is separated from urea by a time lag.

No one can see the price of ammonium nitrate rising again in the short term, but once the Indian deal is concluded in November, most pundits expect another spike in urea, especially when the usage period starts. Falling energy costs may help bring AN down somewhat, but remember that it is gas, not oil, that fuels ammonia production and, again, there is a lag before gas prices follow those of oil.

Sadly, for the UK, the recent lull in phosphate pricing cannot be passed on to the farmer. These materials are traded in dollars and a 15% drop in sterling against the dollar evens out a 15% drop in phosphate pricing.

fertiliser report