Farmer uncertainty over Basic Payments has brought the fertiliser market to a standstill in recent months.
Thousands of farmers across the UK have been left without their Basic Payment Scheme cash and have no clear indication of when funds are likely to be in their accounts.
Guy Gagen, chief arable adviser at the NFU, suggested this meant a lack of cashflow was restricting fertiliser sales to farmers.
He said: “Prices seem to be way above what the market would want to bear. We are usually told by manufacturers demand is led by arable prices internationally and this is what their driver is. We do not really see much of a drop.”
December figures from AHDB show 34.5 per cent N ammonium nitrate is priced at £225-£233/tonne, with 46 per cent granular urea at £230-£238/t.
He said it was difficult to see how farmers would be tempted to buy fertiliser in current conditions.
Several banks have offered funds to farmers in the event of late payments, including Lloyds Bank, which has set aside a £500 million contingency fund.
Arable prices have remained depressed throughout the past year, with successive large global harvests leading to significant stocks. LIFFE wheat futures have traded generally between £110/t and £115/t in recent months.
Calum Findlay, fertiliser manager at Gleadell, underlined Mr Gagen’s comments on how sales had been slow in recent months.
He said: “Prices are trading sideways. A lack of cash is still a problem.”
He said farmers were unwilling to sell grain at current prices and suggested this was hitting cashflow, restricting fertiliser sales.
“I think generally, farmer returns are down and this is what is driving the market. Commodities and cashflow are down. Wheat is £100/t rather than £140/t.”
Mr Findlay said prices were about 10-15 per cent down across all fertilisers compared to last year. He said buying would need to increase to cover spring requirements in Europe.