Cheaper oil may not mean cheaper fertiliser

By Roger Chesher

FARMERS at the Royal Show this week were hoping that this months lower nitrogen price of 111/t was brought about by the forecast cut in oil prices, and would herald a return to the era of rock bottom fertiliser prices.

In Europe and America, nitrogen manufacture uses natural gas as a feedstock, and gas prices are rising. So while energy price reductions apply a brake, until gas prices drop, the domestic fertiliser price is unlikely to be influenced.

The cheaper price has been issued by the manufacturers to stimulate early buying and will increase month on month until the spring when it is anticipated to reach 130/t.

The majors have outlined a clear structure to their merchant customers. The early buyer at last has a distinct advantage and indications are that this structure will hold.

Manufacturers offer cash terms only and have withdrawn any concept of a fixed margin to favoured merchants, who are left to generate their own profits.

Volume rebates have also disappeared and orders must be collected during the price-ruling period or will be cancelled.

Farmers wishing to purchase material in 50kg bags must expect to pay a surcharge of around 7/t, and smaller orders will not be priced at the same rate as a fully-loaded articulated lorry.

Compound prices have started the season at the same level as last month, and should hold steady for two or three months and then rise gradually into the spring.

The autumn PK market has yet to get truly under way. The rationalisation of the European fertiliser industry has left Terra in a position of leadership in the UK marketplace.

With the largest nitrogen capacity in Britain and contracts to supply to both Hydro and the blenders, Terra stands a real chance of bringing some stability back into the market.

Despite the capacity of both Terra and Kemira, the country will still need to import some 2.5 million tonnes of nitrogen to meet demand, so farmers need not worry unduly that there will be no bottom in the market.

In a structured market, importers tend to pitch their prices about 10/t below the majors so, whilst imported nitrogen is still around at last seasons prices, new material will not be as cheap.

Both the import and blended markets are quiet; the former with only old season cargoes coming in and little ordered forward, the latter allegedly low on nitrogen supplies.

China has reportedly entered the Urea market and many American AN plants are shut down. Both factors will tend to keep world prices higher.

CURRENT MARKETS (prices in )