The fertiliser supply situation this Spring is very different to any other year in that the meteoric increase in the prices of all raw material nutrients have increased by 250%+ from those of recent years.
The following or a combination of same are the key causes of the current situation.
1. International Gas prices have increased from €18/MWH to €90/MWH from the 25th January 2021 to 25th January 2022 or 500% with that price oscillating between €73 and €175 in the past 6 weeks.
2. Due to the extraordinary and vertical increase in Gas prices from September to November more than 30% of the CAN and Ammonia production capacity in Europe ceased production as it would not have been possible for international CAN and Ammonia producers to break even with the prevailing cost of gas versus the prices that they could receive for their output.
As a result the CAN stocks at producer level in Europe are massively reduced as the main application season arrives.
3. There is a very clear strategy by three key fertiliser producing Countries namely Russia, China and Turkey that they strongly wish to hold as much of their normal fertiliser production for internal use and have thus put mandatory limitation (quota) on normal export volumes such as Russia, a ban on fertiliser exports in the case of Turkey and China have placed a
significant economic disadvantage on producers who would consider exporting fertiliser. So directly and indirectly these influences have shorted and will short the supply. As a result of this the imported product into Ireland is well down year to date and there is not clear evidence of that changing any time soon.
4. The ongoing and increasing UN and US sanctions have continued to eliminate access to fertiliser supply from some producer countries such as Iran (nitrogen) over many years now and more recently the ban (sanctions) on Potash from Belarus (which produces c20% of World Potash) are having a big effect especially now in a very tight supply period.
5. Another key factor is logistics such as the cost and availability of Shipping services and Covid related disruptions at all levels in the supply chain. Irrespective of the 200% increase in the cost of shipping this year almost all ships arriving into Ireland are running behind the agreed schedule by many weeks in most cases and this challenge will effect supplies as our peak alone is continually delaying the arrival of cargos of fertiliser into Ireland and is a big ongoing challenge at present. Other costs such as transport, pallets, packaging have also increased significantly.
As a result of the massive increase in all fertiliser products the financing challenge is enormous this year as credit underwriters are reluctant to increase credit limits and thus recent credit limits that prevail along the chain would only facilitate c33% of normal tonnage to be secured. This is going to be a very big challenge by mid-March when all parties along the supply chain have reached their limits. This will require immediate payment for all product purchased over such limits in addition to ensuring that the older debt is also paid up on the due date.
While there are many other factors at play at this time in the world of fertiliser, the very evidential shadow of the very serious geopolitical positioning could at any stage bring an even more sharp edge to all the above challenges. So despite all our hopes and wishes there is no sign of any fundamental changes that might lead to any weakness in fertiliser prices any time soon so in our view it is very advisable that all farmers should plan carefully both in terms of quantity, receive delivery early and be prepared to arrange a satisfactory payment plan as soon as possible.
Please contact your Technical Sales Advisor to discuss your fertiliser requirements for the coming season.