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Talking Policy with Mike Hambly: Fertiliser is a key input to our cropping success

Insights

By the time you read this article many of you, like me, will have started your spring fertiliser programme.

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Fertiliser is a key input to our cropping success; I often consider nitrogen applications are the only input which actually increase yield.

 

Everything else I apply – herbicides, fungicides, PGRs and insecticides – acts only to protect the potential and limit the downside.

 

One thing we are all aware of is the price of fertiliser and the impact it has on our margins. Latest results from the Farm Business Survey for the South West show of all expenditure on inputs, 44.2% is spent on fertiliser for a winter wheat crop and 47.9% for rapeseed.

 

With fertiliser accounting for 45% or more of variable input costs, the ability to plan purchases and the need for a transparent and competitive market is a critical factor in farm profitability. Fertiliser is a commodity, but unlike many other agricultural, mineral and energy commodities, there does not appear to be any transparent price discovery mechanism in place.

 

Last month I discussed the enormous pressure from EU legislators to regulate agricultural commodity markets with MiFID on forward sales and purchases of grain. This is in sharp contrast to the apparent lack of willingness to disclose and publish prices for many farm inputs, including the biggest – nitrogen fertiliser.

 

There are a number of regulations in place which act to protect fertiliser prices, often meaning we face higher prices through regulation.

 

Anti-dumping is one such measure and DG Trade has held formal anti-dumping hearings on potash and liquid nitrogen in recent years resulting in the abolition of duties on potash (2011) and UAN (2012).

Tariffs

However, when the issue of AN from Russia was considered last spring, the commission decided to maintain tariffs, albeit at a slightly reduced level, of €33-€47/tonne (£24-£34). This was largely because of the perceived advantage Russian producers had in access to cheap natural gas. The NFU lobbied, with other European partners, for the removal of the tariff; regrettably the timing of Mr Putin’s activities in Crimea did nothing to help our case.

 

Tariffs also exist on most imported products of phosphate (4.6% duty) and nitrogen (6.5% duty) and it seems difficult to justify these in a market where farmers are asked to face up to the competitive pressures from outside Europe. NFU policy is to seek the removal of these tariffs and has been working with economists, other EU farm organisations and importers while seeking support from Defra and BIS on the subject.

 

More encouraging is the recent news from China where taxes on the exports of both phosphate and urea have been relaxed, with some analysts predicting the initiative could cut US$35/t (£23/t) from the world market price of urea.

 

Growers tell me they are concerned and frustrated by the way in which UK manufacturers appear to manage the market. The NFU believes growers need access to mechanisms which allow them to manage their risk on fertiliser pricing. Forward prices for future deliveries are not readily available from EU manufacturers and yet we hear of such mechanisms being available to growers in Asia and USA.

 

EU manufacturers have been clear they do not see any need for transparency in pricing for spot or futures prices. The NFU has asked Agriculture and Horticulture Development Board to collate and publish data regularly on Chicago Fertiliser Swaps pricing, as they do for other commodity futures, and to publish a market analysis on information which could be available from private sources but is currently unaffordable for individual farmers.

 

With many of these factors playing into the hands of manufacturers, it is encouraging the new DG Agri commissioner, Phil Hogan, is interested in the apparent lack of competition in fertiliser markets. Hogan recently stated he found it hard to understand with a 45% reduction in energy prices there were proposals from manufacturers to increase fertiliser prices by 7% in early this year. Hogan plans to take the issue up with the EU Competition Commission. Let’s hope this is the start we need to give us access to a more competitive and transparent market for our key input.

 

  • Mike Hambly farms in a family farming partnership near Callington in south east Cornwall. He is currently the chair of the NFU Combinable Crops Board and is the first Cornishman to hold the position.
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