Buy now warning as fertiliser prices set to soar

Farmers who still have to purchase their 2011 fertilisers are being advised not to delay as price are likely to shoot up 15-20 per cent in the coming weeks.

Ken Bowler, the marketing manager for GrowHow which supplies almost half the UK fertiliser requirements, yesterday said a rise of this magnitude was necessary to "catch up with the rest of the world market".

His "buy now" advice was specifically for compound fertiliser as opposed to straight nitrogen purchases, where prices have risen dramatically since the beginning of July.

Farmers and farming leaders have accused fertiliser companies of riding on the back of increased grain prices in setting higher values for their produce, but Bowler rejected this. The price of key ingredients nitrogen, potash and phosphate were very much set by worldwide supply and demand, he said.

Bowler said demand for fertiliser had increased as grain prices have risen. Production capacity is almost at full stretch and it was inevitable basic commodity prices would increase.

Global demand for nitrogen is up more than 3 per cent year on year, although new production facilities are coming on stream and these should ease the upward price pressure.

In contrast to his prediction on compound fertiliser, Bowler thought the price of nitrogen might ease in the coming years. However, deposits of phosphates are finite and there are worries that this may become a major barrier to increasing production in the long term.

Potash is more freely available, but the problem here is the deposits that are being worked are in relatively few hands.

The UK is a small player in the world fertiliser market with less than 1 per cent of the total nitrogen supply being required for the home market.

The world price is determined by China, far and away the biggest producer of urea, one of the main suppliers of nitrogen.

China uses a tax - currently 110 per cent - to control urea exports, thus ensuring their farmers have access to cheap fertiliser.

The equation is further muddied with almost half of the world total usage of nitrogen being subsidised by national governments to ensure home food production. Bowler said India spent more than $21 billion (13bn) - more than its defence budget - on such subsidies.

GrowHow came into being three years ago following the withdrawal of all the major manufacturers in the UK.

It is a joint venture company with the two main shareholders being Scandinavian fertiliser giant, Yara and United States based CF Industries.