Fertiliser makers accused of conspiracy

By Robert Harris

FERTILISER makers are accused of conspiring to drive up prices at a time when growers can least afford it.

Major manufacturers have already reduced nitrate capacity in Western Europe by 3 million tonnes to combat oversupply.

Now, Hydro Agri has announced a 500,000t reduction in NPK compounds by shutting three plants in France.

Ammonium nitrate prices have risen at least 30/t since the autumn to 115-120/t, sparked by a shortage created by cutbacks in production last summer. Compounds have climbed about half as much.

The closures will add further pressure, giving makers more chance of achieving their hoped-for 125-130/t rate for ammonium nitrate next spring.

Farmers are exasperated by spiralling fertiliser costs, says Marcus Themans, chairman of the NFU technical services committee.

Our prices [for agricultural products] are dropping through the floor. Other industries think they can make profits at the expense of farmers.

“If farmers tried to structure the market the way fertiliser manufacturers have done, they would be in court tomorrow.

It smacks of, if not explicit, then implicit, collusion. They (the makers) all seem to know pretty well how much needs to come out of the market to guarantee profits.

Colleague Andrew Opie, head of technical services, says the NFU will examine how the market operates. We might then look in more detail at the supply chains.

Whether a full-blown investigation will follow remains unclear.

It is difficult to develop a long-term strategy at this stage. But some prices have increased by as much as 50%. That is quite a jump in six months.

Rather than profiteering, makers are simply moving back into profit, says Terras Andy Yates. Yes, prices have gone up by 35/t. But we were making a thumping loss.

Hydros Doug Shaw agrees. The agricultural side of Hydro has been haemorrhaging over the past couple of years.

Both blame a sharp rise in raw materials costs. Ammonia, gas and oil prices have all at least doubled in recent months.

Even at an AN price of 110/t, makers are only just making a profit, says Mr Yates.

Manufacturers may revamp their pricing structure to attract early business to avoid a repeat of last summers glut.

Terra and others are aiming for 125-130/t next spring to secure a profit and reinvest.

But we need to put some carry in the market so farmers can see they will benefit by ordering early, says Mr Yates.

That suggests prices for AN could kick off the new season, which starts next month, at 110-115/t.

We may even go lower to make it more attractive, and factor in bigger monthly increases.

• Fertiliser shake-up ends – for manufacturers, FWi, yesterday (15 June, 2000)
• Fertiliser market prices, 1999-2000