2 August 2002

Nitrogen prices dip as the trade looks for buyers

By Robert Harris

NEW season nitrogen prices have dipped sharply as merchants battle to tempt early buyers to part with their cash.

UK ammonium nitrate has been selling at less than £100/t on-farm, a three-year low. And, while fertiliser makers are determined to restore some order to the market, UK ammonium nitrate is likely to remain cheaper than expected for some weeks.

Recent upheavals in the UK fertiliser distribution network have left two leading merchants, Banks Cargill Agriculture and Dalgety Arable, keen to make an early mark on this seasons trade, says Roger Chesher of the Bridgewater Partnership consultancy.

In June, Banks Cargill severed links with Terra Nitrogen to become Hydro Agris biggest UK distributor. In what was said to be an unrelated move, Hydro ceased trading with Dalgety.

The official on-farm new season AN price of £105/t, announced in early July by Terra and quickly followed by Hydro and Kemira, was soon eroded as these merchants and others attempted to kick-start the early market.

UK product was available in July for £96-99/t depending on load size and location, says Mr Chesher.

Stuart Allison, fertiliser director at Banks Cargill, believes the market was also confused by a quantity of imported Spanish 33.5% AN. This sold for £97/t, which should have put UK 34.5% AN at £100/t.

"There was also a lot of speculation that whatever we did was backed by Hydro. I think people got carried away."

Tony Taylor, Dalgetys chief executive officer, admits his firm, like others, has been selling nitrogen below cost. "We have matched prices, and one would hope we can negotiate with the manufacturer to make money. Theres no point selling fertiliser at a loss. But manufacturers have ultimately got to make the same prices as last year, or they will shut plants."

Makers contacted merchants this week to voice their concern. Terras fertiliser director, Stuart Beer, says: "Everyone was taken by surprise at Banks Cargills drive into the market-place. It has carved up the price. Once this happens, it is quite difficult to get a grip on it."

Mr Beer wants to achieve an August on-farm price of £100/t, which is still about £5/t below initial expectations. "I have told merchants we need to get back to three figures as soon as possible. Merchants have had a bit of a run, but they are losing money. We will not be supporting those losses."

Doug Shaw, managing director of Hydro Agri UK, is also pushing for "at least" £100/t on-farm for 34.5% AN during August. "We have had a difficult start to the new season. There was a reasonable degree of farmer apathy, and the start price did get eroded.

"Everyone has been keen to create a market. But it would be wrong to start pointing fingers at people. We shall let the dust settle and see what lessons can be learned."

Mr Chesher says makers are still targeting £118-120/t next spring to reward the early buyer and to cover the rising price of gas, a key raw material. "Imports are not really featuring, global demand for nitrogen products is reasonably firm, and the UK is cheaper than Europe. While the level of farmer buying has an influence, there is no real reason for prices to be this low." &#42


FERTILISER MARKET REPORT

August 2002 (£/t delivered)*

N (UK SP5, 34.5%) N (UK SP5, 34.5%) Imported urea Imported AN

New season Aug Sept Granular Lithuanian

£96-99 £98-100 £99.50-101 £120 £96-98

NPK complex autumn grade

25.5.5** 20.10.10** 15.15.20 17.17.17 28.5.5.+6SO3 0.24.24

£107-108 £112 £127 £132 £116 £113-114

*Prices are based on 24t loads for cash payment month following. Prices for smaller loads and 50kg bags will vary. ** For blended prices, deduct £5/t.