OFT probe into fertiliser prices

By Roger Chesher

COMING as it did, just before Easter, the news of an investigation into fertiliser pricing by the Office of Fair Trading is taking some time to percolate through the industry.

Those directly affected, Terra, Hydro and Kemira, face a costly and time consuming response period when their already stretched resources should be concentrated on “the day job”.

Generally, the industry response from the Fertiliser Manufacturers Association is that it sees no reason to have anything to fear, that it to a certain extent was expecting the announcement, and is looking forward to clearing the air.

One leading importer has gone so far as to suggest that the industry has more to gain than to lose, in terms of better on-farm understanding of this complex market.

“UK producers will welcome it, we dont believe it will reveal anything”

Conversely the NFU clearly feels the industry has a case to answer, citing widespread outrage from its members, brought about by this seasons price rises.

But, to continue at old-season prices would have meant more massive losses, say the manufacturers, who have only seen a profit in four years since 1990.

Now that the market is pan-European, if not global, tracking the complex mix of capacity changes, inventories, energy costs, imports, demand and world prices, which determine price, is increasingly demanding.

One outcome of the investigation may well be better communication enabling farmers to purchase fertiliser more cost effectively than simply waiting until the point of use.

For example, while the current market continues to be very quiet, and prices have little changed, the prospect for cheaper nitrogen in July is good.

With the realisation that the first dressing on grass is now probably lost for good, and that spring cereal plantings are significantly down, the current season could well finish some 15 to 20% down in volume.

The weather-driven situation is similar throughout Europe as interest in the current market starts to evaporate.

Consequently in terms of ammonia and urea pricing the global market is weakening.

Current import arrivals are existing contracts, whose price reflects todays market, whereas new cargoes for the start of the next season in July reflect the changing market and could well be pitched at 95-100/t on farm.

New-season domestic prices will probably reflect this seasons, starting around 105-110/t on farm.

While there may be a little respite in compound prices next month as the aftercut season starts, there seems little alternative to biting the bullet and paying end of season prices for product for immediate usage.

• Watchdog to probe fertiliser prices, FWi, 13 April, 2001
  

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