New season N cost set to be lowest for decade
By Robert Harris
NEW season fertiliser prices are set to be the lowest in real terms for almost a decade.
Recent values have been at or below £90/t for 34.5%N delivered, and manufacturers may find it difficult to charge levels they consider acceptable.
Traditionally June is seen as the end of a fertiliser "run", so the big three UK makers are trying to set post-July 1 deliveries at £98/t. But such prices are already meeting resistance among farmers, who view current low levels as a benchmark.
Aggressive pricing by merchants determined to hold on to market share at greatly reduced margins has stimulated demand, it seems. "We are refusing to supply some of the orders at prices they are quoting," says Hydros Robin Shackleton. "We have heard of deals being done at £90 on farm with payment due in December."
Kemiras Roger Chesher agrees merchants are keen to maximise sales. "Everyone is under pressure." And "new player" Terra is very strong on straight N, he adds. "They are possibly interested in exploiting their capacity a bit more than the old ICI business."
Terra has already done almost 10% of next seasons fertiliser business, some on trust deals. Nitram has been selling for a top price of £92/t on farm, with Sulphur Gold carrying a £2-£3/t premium. "It is certainly the best buy that farmers have had for a number of years," says the companys Andy Yates. "Last year straight N was over £100/t, although that eventually pegged back to £98."
Fertiliser broker Mike Stickland reckons makers will be hard pushed to raise prices. "I would say there is no chance of getting £98/t. They may talk of £90-92 now, but big tonnages, paid September, are available for about £87/t in the east and south east."
These prices are blocking imports, he adds. East European material would have to be priced at £75/t on farm to compete, but after merchants cut and transport that is equivalent to £63/t on the dock. A dearth of imported material may allow UK makers to do more early business.
"Maybe in two or three months time they will be able to push prices up." That would then allow imports to compete, capping values.
But all makers are aiming for a £20-£25/t rise through to next spring. "You could say that is optimistic, but changes to the levels of import taxes should raise the price of imported N in the fourth quarter," says Mr Yates. Unless that happens, he and the other makers maintain they will make losses this year.
"There is no sense in the industry selling at these levels," says Mr Chesher. "If the fertiliser industry is going to continue to reinvest and put all the emphasis on safety and environmental issues, supply a proper service and make a reasonable living, then the price of N should be at £120 or more."
"It is a desperate situation," says Mr Shackleton. "Yet farmers would hardly notice another £15/t on the bottom line." *
About 350t of UK-made nitrogen is used at GLBouldens Ruffins Hill Farm, Aldington, Kent. Cereals grower John Boulden is tempted by current prices and may book part of his annual requirement earlier this year.