Global nitrogen markets extremely ?bullish?

Supply and demand issues, which led to the 2011/12 nitrogen fertiliser market opening at higher prices than forecast, continue with little sign of change to ease rising prices.

Speaking at Cereals 2011, GrowHow Marketing Manager Ken Bowler quoted one market analyst who, in early June, described the nitrogen market as ’ablaze with higher prices for all products’’

Currently, a number of market conditions reflect issues that drove the sharp price increases last seen in 2008.

’On the demand side, we are seeing a number of nations who have either lost export capacity or have reduced self-sufficiency in fertiliser production,’ said Mr Bowler. ’For instance, a reduction in gas supplies means Pakistan entered the world market seeking an extra 300,000 tonnes of urea. Similarly, Bangladesh has diverted scarce gas supplies to energy, rather than ammonia, production. While Egypt, a traditional exporter of urea, is reserving manufacture for domestic consumption until August at the earliest.

’Against this the supply side is becoming tighter worldwide too. There had been an expectation that China would once again become a major exporter. However, the latest view is that China will be exporting less during July to November which will put strong upward pressure on prices. Across Europe some manufacturing capacity is down due to maintenance or inadequate gas supplies.’

The impact of these market forces is a sharp upward movement of fertiliser prices with granular urea prices on the world market rising by $80/t within two weeks.

’Today the granular urea price stands at $510/t FOB which is $280/t above what it was this time last year,’ said Mr Bowler.

Against this world market backdrop, GrowHow UK continues to predict that the market will be dominated by volatility.

’We appreciate the challenge to farmers’ said Mr Bowler. ’However, individual businesses need to develop a strategy for sourcing fertiliser that takes account of likely market movement and the cash flow of their business.

’GrowHow UK will continue to support farmers through the financing arrangements offered by ING Finance, the only source of unsecured lending available for such purchases in the GB market.’