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Fertiliser prices expected to remain under pressure

It has been a buyer’s market for fertiliser recently, with oversupply and downward price pressure across all nutrients on the global market.
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But there has been a glimmer of an upturn in the nitrogen market.

 

The most recent report from AHDB pointed to some upward movement in European demand, although the underlying trend remains weak.

 

Despite the onset of spring, nitrogen demand remained stagnant in the first months of the year, said the update, and this applied to all major nitrogen fertilisers.

 

In the UK, after warnings from the trade not to hold off purchasing too long in case of logistical difficulties, some March deliveries of spot orders have been late for application.

 

However, the report, produced with Integer Research and ICIS, said despite these issues, ammonium nitrate (AN) supply had been sufficient to maintain downward pressure on pricing.

 

It added there was a possibility of cost-competitive Iranian product becoming increasingly visible on the European market long-term.

 

Looking at prices, AHDB said the Black Sea AN price dropped to £0.38/kg N in February, the lowest since July 2015, with much the same trend in granular ureas, which hit an average of £0.34/kg N over the first two months of 2016.

 

But UK trader Gleadell suggested markets remained firmer than many speculators had anticipated.

 

The firm’s fertiliser manager Calum Findlay said urea remained the most competitive buy on a nutrient cost basis. AN prices had firmed in the UK, with imported stocks down 20 per cent year-on-year, and significant demand was still expected for top-up tonnes from the grassland sector.

 

Phosphate

The AHDB update noted a slight pick-up in demand for phosphate in March and Latin American demand had also rebounded ahead of a second crop season.

 

Despite these positive trends, however, globally it was expected demand levels would remain lower than previous years, due to high inventory levels almost everywhere.

 

For example, the Indian Government, a major global importer of phosphate fertilisers, announced a reduction of 13 per cent in the subsidy allocation for both these and potash fertilisers in March.

 

The pricing of phosphate products has remained low, with February’s average di-ammonium phosphate price in both sterling and P2O5 terms falling by 6 per cent from January to £0.55/kg in February this year.

 

Potash

The report said there was no significant source of demand growth being seen globally for potash. India’s subsidy reduction was also likely to dampen global potash demand.

 

One bright spot for potash producing companies in the longer term, the report suggested, was the planned lifting of EU restrictions on sugar production and exports from 2017.

 

It added: “This should encourage greater sugar beet production, which has a large potassium requirement.”

 

Nevertheless, prices continued to soften in most regions, with downward pressure expected to remain a feature for the foreseeable future, the report concluded.

 

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