I have just written this story about Yara's record profits and thought one or two of you might have something to say about it....be warned, it doesn't make very easy reading if you've got fertiliser to buy this season!!

Fertiliser manufacturer Yara has reported its strongest ever quarterly result, following strong demand and increasing urea, nitrate and NPK margins.

Second-quarter net income after minority interest was 4,415m Norwegian Kroner (about £435m), way above the NOK 1,422m (£140m) last year. Operating income was also well up at NOK 4,749m (£468m), some NOK 3,420m (£336m) above the same quarter in 2007.

“It is with great pleasure that I report Yara’s strongest quarterly earnings so far,” CEO of Yara International, Thorleif Enger said. Since March 2004, Yara had delivered 18 consecutive quarters with earnings above cost of capital, he said.

“The improvement this quarter is mainly driven by strong demand giving higher fertilizer prices, only partly offset by increased raw material costs.”

That news was likely to anger farmers struggling to come to terms with the soaring cost of fertiliser, NFU Scotland president, Jim McLaren said.

“The genie is well and truly out of the bottle as far as the reasons for the increases in fertiliser costs at farm level are concerned.

Farmers had been led to believe that the main reasons for the huge increase in prices were the increase in the price of gas and a surge in phosphate and potash prices, he continued. “However Yara has acknowledged that the increase in its profits was largely due to world demand for their products and those profits were only partly effected by increased costs associated with the manufacture.

“The reality is that the fertiliser manufacturers are profiteering from a dramatic imbalance in the global fertiliser supply and demand situation. This is evident from the near 200% increase in profitability announced by Yara against a backdrop of 19% increase in sales by volume.”

just being devils advocate and given i buy vast amounts of fertiliser i have no sympathy for Yara,but two points

a) was the farming industry not doing the same when it sold its grain at much higher market price last season, so why should we expect suppliers to sell at less than market price? 

 b) if the sold price of fertiliser went up by say 50% and their volume by 19% would not their sales value expressed in currency increase dramatically anyway and given that say 10% of £100 is £10 and 10% of £200 is £20 would not their net margin expressed in currency be consequently larger anyway?

The principle will be the same in farmers accounts , 07 exceptionally good, 08 really not bad as running mainly on 07 costs, then 09 horrible as running on 08 costs and so it will be for fertiliser producers who will be coming to the end of forward hedged positions on raw materials.

or am i missing your point?

or do i miss the point

               I have just been doing some forward gross margin budgets and, with fertiliser costs for cereals over £400 per Ha and rising, they are very alarming. I expect Yara is doing what most large companies do and that is to make the best return on investment it can. However, Yara is in a position approaching the monopoly mark which means that a degree of external control may be necessary. If it is genuinely due to increase in demand, say, from China, India etc., then there is little we, as farmers can do. If it is not much to do with higher input costs, such as fuel, then they have been deceitful and Jim McLaren is quite right to give them a warning shot across the bow.