Global fertiliser shortage looming

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MOTORISTS and transport operators may be complaining about the cost of fuel at the pumps with prices now in the region of £5 per gallon.

However, those with long memories might just recall that 40 years ago that same volume could be purchased for little more in the pre-decimal era than the equivalent of 35p.

Farmers are just about managing to survive with higher fuel costs which have seen "red diesel," now priced at over 60p per litre. But the same cannot be said for the cost of chemical fertilisers where demand and supply are currently miles out of balance.

Calum Findlay, a trader with the Lincolnshire based firm of Gleadell, which is one of the leading players in the UK market, is always close to market realities.

Speaking exclusively to The Scotsman yesterday, he said: "It is really quite frightening from the farmer's perspective. Granular urea – that's a form of nitrogen – has recently been trading at 350 per tonne, but my information is that it will soon be close to 390 per tonne.

"Some compounds, especially those containing high levels of potash and phosphate are heading fast for over 630 per tonne and that compares with little more than 200 per tonne 12 months ago. It's a global market with huge demand from China, India and Pakistan."

Another problem is that virtually no fertiliser is manufactured in the UK: not so many years ago the now defunct Scottish Agricultural Industries (SAI) has a massive plant in Edinburgh close to Leith docks. That site is now derelict and destined for commercial and rural development.

Total world demand for fertilisers is reckoned at close to 550 million tonnes, but the harsh fact is that the UK now accounts for less than 2 per cent of that market. There appears to be little prospect of a change and that may cause British farmers to reappraise their farming policies, according to Findlay.

He said: "We have seen a lot of marginal land come back into production following the end of compulsory set-aside, but even with the significant increase in cereal prices, profits now look questionable. I would still advise farmers to place their orders for nitrogen fertilisers now – prices could rise further, especially with sterling weak against the euro. In the short-term crops can be grown without phosphate and potash , but nitrogen is essential."

Meanwhile the international cereals markets have seen some easing in prices as speculators take bank their profits.

The Home Grown Cereals Authority notes that the International Grains Council (IGC) is forecasting a world wheat crop for the current year of 645 million tonnes. down by one million tonnes on last month, but still represents the prospect of a record harvest.

However world stocks for the end of the year are set to be the lowest for 27 years.

The Chicago futures market has recently seen wheat for December 2008 drop by $25 to $311.92 per tonne while the London price has slipped by 4 to 141 per tonne.

The consensus remains that farmers should lock into secure contracts, based on their individual assessment of the cost of production and the margin they seek to make a profit.

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