Farmers with the space to store fertiliser and whose cash-flow permits should seriously consider booking their 2010 fertiliser requirements now to avoid potential supply issues and possible price increases in the New Year, according to the AtlasFram Group. Philip Collins, Fertiliser Manager for the UK’s largest farmer-owned purchasing and marketing business, states:
"With the main usage season just around the corner, fertiliser orders are currently running at around 70 per cent of normal levels for this time of year, so there’s a great deal of business still to be done. Given a period of good weather in the early Spring farmers will want to get on the land to apply fertiliser. When that happens demand will increase sharply and the market could start to move quickly, putting significant pressure on the logistics of manufacturing and moving product. That would increase delivery times and put upward pressure on prices. Farmers might then find it difficult to secure the supplies they need at short notice, or be forced to pay higher prices.
"The exceptional volatility which we saw in the fertiliser market last year came about when global demand for fertiliser products outstripped supply, which led to massive price increases and manufacturers allocating supplies. At that time the AtlasFram Group’s key objective was to fulfil the orders which had been placed by our Members and by working closely with manufacturers and suppliers we were able to secure all the required tonnage, albeit at higher-than-expected prices which resulted from global market conditions and were beyond our control.
Farmers who were not in the Group or had not forward ordered found themselves in an unenviable situation.
"Fertiliser prices peaked in September 2008 as the worldwide tightening of credit and global recession took effect, which subsequently led to a sharp tail- off in demand, with prices following suit. Since then the Nitrogen, Phosphate and Potash markets have returned to more normal trading conditions and prices have roughly halved from their peaks. Ammonium Nitrate has fallen from £398/tonne to less than £200, urea from £480 to just over £200 and Triple Super Phosphate from over £600 to under £200.
"The market currently lacks confidence and this view is supported by figures from the Agricultural Industries Confederation which indicate that compound fertiliser deliveries have fallen by 40 per cent. Although that situation is unlikely to change dramatically any time soon, shipping rates are firming, energy costs are increasing and sulphur prices are rising, which will affect the cost of Triple Super Phosphate (TSP) and Diammonium Phosphate (DAP), the most commonly traded phosphate fertilisers.
"Another consideration is that during the last two or three years a significant proportion of farmers have backed away from paying very high prices and taken a ’PK holiday’. However, with many test results now showing that soil indices have slipped back by more than farmers might have expected, demand for these inputs could increase significantly in the short term.
"Whilst no-one in the industry expects prices to return to their former levels in the immediate future it is likely that they will rise by more than the cost of borrowed money, while the volatility of Sterling against the Euro and US Dollar means that the prospect for price increases is much greater than the potential for downward movement.
"AtlasFram Group is therefore advising its 1250 Members throughout the UK to plan their fertiliser requirements carefully and secure product while the market is stable and prices are at relatively affordable levels."
