Dearer nitrogen and potash will push up fertiliser costs

Published on Friday 30 October 2009 19:54

THE recent drift upward in the price of oil does not automatically mean that the cost of fertilisers will rise in parallel, but farmers can expect to pay between 15 and 20 per cent more for their nitrogen within the next 12 months.

That was the prediction made by Ken Bowler, the marketing manager of GrowHow, yesterday. Unlike the previous period in 2008 when oil prices also drove up fertilisers, this time there are reasons why the two prices are splitting.

"There is more oil and gas in the system. The recession and the mild autumn have cut demand and there is a plentiful supply of fuel around.

"Last year, demand was still strong and oil and fertiliser prices tracked each other."

Bowler believed the two would be linked once again in the future but was not prepared to predict when this would happen.

Currently the real price-driver for nitrogen fertiliser is the cost of urea, one of the main components. There is a fairly strong prediction that urea prices will rise within the next year by $50 per tonne or 20 per cent from their present $260 per tonne.

GrowHow is the last major fertiliser manufacturer in the UK and has just over 40 per cent of the home market. Earlier this month it opened a 15 million nitrogen manufacturing plant at Billingham.

Almost two-thirds of the annual total of fertiliser sales in the UK take place in the autumn with the balance running through to the spring.

The overall tonnage of fertiliser used annually in the UK has fallen dramatically in the past quarter-century. In 1984, 1.25 million tonnes of nitrogenous fertiliser was sold. This is now down to just over three-quarters of a million tonnes.

The decline in phosphate usage in the same period is even more dramatic with a drop of 53 per cent being recorded.

A significant factor in fertiliser usage in recent years has been the far greater targeting applications for crop and soil needs.

The increased use of soil mapping has reduced and in some cases eliminated the need for phosphates and potash on some soils.

Bowler's prediction for compound fertilisers with potash and phosphates joining nitrogen as the three main chemicals making crops grow also sees a price increase in the coming months.

While the price of phosphates is relatively stable and it has returned to around the $350 per tonne mark compared with its price spike of $1,200 in 2008, the same cannot be said of potash.

During the 2008 panic it rose from $200 per tonne to almost $1,000 and it is now back trading at the $400 per tonne mark. However, Bowler said potash manufacturers were putting pressure on the market for further price increases.