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06/06/2009 08:12:38
What to expect in the fertiliser marketplace in the future
Source: Law Fertiliser
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Attention to detail in procuring raw materials and direct relationships with manufacturers has enabled the fertiliser manufacturer Law’s to have an even larger price advantage in a range of fertiliser products than normal during this last season. Law’s Managing Director Mark Law points out that there are many other ways his company can reduce growers’ costs such as product timing, more accurate fertiliser placement, the use of bulk fertiliser, the use of complex fertiliser compounds, nutrient mapping and prescriptive fertiliser formulations.
He supports his view by comparing costs of phosphate last autumn and Law’s appears to be able to deliver a substantial cost benefit to their customers with Law’s Phosphate being half the price of competitor phosphate. Considerable savings were made for Nitrogen and Potash too, says Mark.
Mark Law also offers his expertise in understanding future trends. "The fertiliser market is returning to a semblance of normality after twelve dramatic months, but it is important to consider the trends that will drive it in the future. For example UK prices are driven by a number of global forces, which are dominated by demand from developing economies that either look to increase food, especially meat production, or from those countries with large foreign currency reserves like China, that are looking to increase self sufficiency of goods and cater for increasingly wealthy and expanding populations.
"At Law Fertilisers we felt that the buying practices of such countries to procure raw materials at any cost on long term credit of up to 360 days was unsustainable, says Mark.
He says that the upward price trend was driven by demand, rather than cost, and hence had the capacity to drop, which duly happened very rapidly from September 2008 onwards.
Mark Law continues that the marketing strategy of selling nitrogen on allocation to secure supplies at prices over £300/tonne during 2008 could be considered misleading, causing increased costs for small businesses for the benefit of one set of overseas shareholders.
"As for the future, the credit crunch, banking crisis and stock market meltdown will keep prices quiet and low in the coming season as finance remains limited for international trading or for funding agricultural intensification projects in developing and emerging economies. Furthermore, the boom year of 2007/2008 has led to increases in production capacities and new projects and therefore larger stocks exist worldwide in all the main commodities," says Mark.
Phosphate will settle down at half 2008 prices as worldwide demand remain low and increased supplies come onto the market during the season. (A new factory in Egypt is due to become the world’s largest producer by 2011 with 3 million tonnes/year.) Sulphur is a major raw material in phosphate production being used for leaching the phosphate from the mined rock. Prices reached over £1000/tonne in June 2008, but current levels are to remain below £40/tonne for the foreseeable future.
He predicts that Potash remains high, with worldwide prices over £500/tonne. even for large cargoes of 20,000 tonnes. "This is more a reflection of the lack of competition in the marketplace with two global players setting the world price, Canada and Russia, and only two mines in the UK and Germany dominating the European supply. With a 40% reduction in world demand and lower planted acres and farmer resources, we expect, and are lobbying for, price reductions of up to 40% within 12 months."
Moving to the key question of Nitrogen, Mark considers that nitrogen pricing continues to be weak with most UK suppliers now matching Law’s winter price of £250/tonne. "At the time our nitrogen price was over £100/tonne below the general market price. Weak demand, resistance to early buying, reductions in Russian gas demand by 50% leading to weekly price discounting will lead to a stable and low pricing position for nitrogen during the year with little benefit from early purchases. Law’s expects to be able to make offers well below £200/tonne for all nitrogen grades to maintain our market lead in cost effective commodities. Needless to say, liquid nitrogen products will continue to be uncompetitive as the technology becomes outdated."
However, Mark warns that the present reduction in pricing is likely to be short lived as the fundamentals behind the fertiliser sector of limited producers and, in the case of phosphate, limited supplies combined with increasing demand for food and the effects of climate change suggest that the next commodity boom may be just around the corner. "I would urge UK growers to make sure that they are kept well informed on prices and products. It can only benefit them to buy directly, buy locally from companies such as Law’s."
For further comment and information please contact Mark Law, Managing Director, Law Fertilisers Ltd on 01354 740740 or on 07710 324463 (mobile) or via e-mail mlaw@lawfertilisers.co.uk
He supports his view by comparing costs of phosphate last autumn and Law’s appears to be able to deliver a substantial cost benefit to their customers with Law’s Phosphate being half the price of competitor phosphate. Considerable savings were made for Nitrogen and Potash too, says Mark.
Mark Law also offers his expertise in understanding future trends. "The fertiliser market is returning to a semblance of normality after twelve dramatic months, but it is important to consider the trends that will drive it in the future. For example UK prices are driven by a number of global forces, which are dominated by demand from developing economies that either look to increase food, especially meat production, or from those countries with large foreign currency reserves like China, that are looking to increase self sufficiency of goods and cater for increasingly wealthy and expanding populations.
"At Law Fertilisers we felt that the buying practices of such countries to procure raw materials at any cost on long term credit of up to 360 days was unsustainable, says Mark.
He says that the upward price trend was driven by demand, rather than cost, and hence had the capacity to drop, which duly happened very rapidly from September 2008 onwards.
Mark Law continues that the marketing strategy of selling nitrogen on allocation to secure supplies at prices over £300/tonne during 2008 could be considered misleading, causing increased costs for small businesses for the benefit of one set of overseas shareholders.
"As for the future, the credit crunch, banking crisis and stock market meltdown will keep prices quiet and low in the coming season as finance remains limited for international trading or for funding agricultural intensification projects in developing and emerging economies. Furthermore, the boom year of 2007/2008 has led to increases in production capacities and new projects and therefore larger stocks exist worldwide in all the main commodities," says Mark.
Phosphate will settle down at half 2008 prices as worldwide demand remain low and increased supplies come onto the market during the season. (A new factory in Egypt is due to become the world’s largest producer by 2011 with 3 million tonnes/year.) Sulphur is a major raw material in phosphate production being used for leaching the phosphate from the mined rock. Prices reached over £1000/tonne in June 2008, but current levels are to remain below £40/tonne for the foreseeable future.
He predicts that Potash remains high, with worldwide prices over £500/tonne. even for large cargoes of 20,000 tonnes. "This is more a reflection of the lack of competition in the marketplace with two global players setting the world price, Canada and Russia, and only two mines in the UK and Germany dominating the European supply. With a 40% reduction in world demand and lower planted acres and farmer resources, we expect, and are lobbying for, price reductions of up to 40% within 12 months."
Moving to the key question of Nitrogen, Mark considers that nitrogen pricing continues to be weak with most UK suppliers now matching Law’s winter price of £250/tonne. "At the time our nitrogen price was over £100/tonne below the general market price. Weak demand, resistance to early buying, reductions in Russian gas demand by 50% leading to weekly price discounting will lead to a stable and low pricing position for nitrogen during the year with little benefit from early purchases. Law’s expects to be able to make offers well below £200/tonne for all nitrogen grades to maintain our market lead in cost effective commodities. Needless to say, liquid nitrogen products will continue to be uncompetitive as the technology becomes outdated."
However, Mark warns that the present reduction in pricing is likely to be short lived as the fundamentals behind the fertiliser sector of limited producers and, in the case of phosphate, limited supplies combined with increasing demand for food and the effects of climate change suggest that the next commodity boom may be just around the corner. "I would urge UK growers to make sure that they are kept well informed on prices and products. It can only benefit them to buy directly, buy locally from companies such as Law’s."
For further comment and information please contact Mark Law, Managing Director, Law Fertilisers Ltd on 01354 740740 or on 07710 324463 (mobile) or via e-mail mlaw@lawfertilisers.co.uk
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User Comments
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The information that could make this article incredible, is Egypt can not be world phosphate producer by 2001 with 3 millions tons comparing that current leading companies produce over 40 millions.
Posted By Anonymous At 08/06/2009 09:30:50