New season fertiliser prices heading for £200/t

Farmers should budget on paying about £200/t for ammonium nitrate fertiliser when the new buying season opens shortly.

Industry sources believe the figure, ±£10/t, is “in the right ballpark”, although farmers will not know for sure until new-season prices are published around the Bank holiday weekend.

GrowHow, Britain’s one remaining fertiliser manufacturer, held its annual conference for merchants and distributors last week. But, despite a frank and full exploration of the business and fertiliser prospects, future prices were not revealed.

fert prices

Behind the scenes, however, it is not too difficult to calculate that given the current cost of gas and the need to make a reasonable profit, ammonium nitrate prices should open next season about £200/t on-farm. GrowHow will be carefully considering their options this week, not least because of the need to compete with imports of urea at about £225/t. This would need Nitram to be priced about £185/t to compete on unit value and efficiency.

The UK fertiliser industry is almost unique in not having huge bulk stores and, in producing fertiliser in bags all year round, it will be keen to stimulate early business. This may be difficult given that many farmers who bought early last year feel they got “caught out” by a sudden price drop at the end of the season.

But to put this in perspective, this has only happened once since the year 2000, and analysis of GrowHow and Kemira price lists over that period (including this year) suggests early buyers have benefited by an average of £18/t.

GrowHow made it clear that its intention is to benefit the early buyer and proposed a new, flatter price structure to encourage a more even sales pattern throughout the season. Without that structure, 3m tonnes would need to be delivered in April, and it simply cannot be done.

Nearly every serious analyst of the industry considered this year’s market to be an anomaly and a more stable situation was anticipated.

Better communication

Speaking at the GrowHow conference, NFU president Peter Kendall said he was happy that communication issues between the company and the NFU had largely been resolved. “There remains, however, a need for the UK fertiliser industry to better communicate with farmers and appreciate their business needs,” he said.

“The key is to ensure that each unit of nitrogen is priced such that it ensures profitable output at the farm gate.” Given that; the NFU recognised the need for a domestic manufacturing base with the ability to make profits and invest, provided it was not at the expense of farmers.

GrowHow’s annual report revealed a turnaround from a loss of £8.4m in 2007 to a profit of £133m in 2008. This may seem a lot, but the figure represents a snapshot at the peak of a highly cyclical business. In terms of Return on Capital Employed there is little difference between the European fertiliser industry and a profitable farming business like Co-op Farms.