European gas prices, a key driver of fertiliser prices for farmers, fell sharply in late December, plummeting from a peak of €180.27 per mega watt hour on 21 December, to as low as €87.97 on 31 December, before climbing marginally to €94.51 on Tuesday night.

Additional gas supplies, mainly from the US, which had been destined for Asia but were re-routed to Europe to take advantage of higher prices, are one of the drivers of the fall. Warmer winter weather also helped to cool the red-hot gas market.

The 52% drop in gas price has fuelled hope that fertiliser prices might also fall, although European gas prices are still three times higher than the same time last year.

The reopening of some fertiliser plants such as Yara, which brought most of its ammonia production in Europe back on stream in mid-December, has added to this hope.

Deverell told the Irish Farmers Journal that October, November and December last year should have been the time that fertiliser was manufactured and distributed to countries like Ireland

However Rory Deverell, a risk management consultant with StoneX, warned that the falling gas price and ramping up of fertiliser production may not result in a substantial enough change to supplies or price in time for the peak spring demand in Ireland and Europe.

Deverell told the Irish Farmers Journal that October, November and December last year should have been the time that fertiliser was manufactured and distributed to countries like Ireland for bagging and subsequent sale to merchants and farmers this spring.

That effective three-month lead time was lost, so although fertiliser supplies are likely to increase from now on, the logistics mean they may not get to Ireland in time for spring.

Industry sources say Irish importers have already bought or are buying about 25% of what they need for late spring delivery, but at high prices.

This high priced fertiliser is the only fertiliser available until any cheaper fertiliser, if it comes, will hit these shores.

In an ideal world, you’d like to see tillage farmers at the front of the queue for fertiliser in early spring, and see the grass guys put off their buying for a while

“Fertiliser supplies should be much better by May, June and July, but the tillage farmers who need it in February and March look like they will be the ones to suffer,” said Deverell.

“In an ideal world, you’d like to see tillage farmers at the front of the queue for fertiliser in early spring, and see the grass guys put off their buying for a while, and then when supplies are better in mid-summer push it a bit harder then,” he said.

“It’s not a blame game, but there’s a dysfunction to the market that you can empathise with everyone because it hurts everybody,” he added, explaining: “The German manufacturer was faced with high gas prices but good fertiliser prices to sell at, but if no-one bought it, that was really expensive fertiliser.

“The importer doesn’t want to buy fertiliser at €800-900/t if farmers are going to stand off and not buy it.”

Price impact

Chris Lawson, head of Fertiliser CRUGroup, said that the market is just returning this week, so we will have a better idea of the price impact over the coming few days.

“It is worth noting that there is still 8Mt of ammonia capacity that is shuttered or curtailed. This is a big improvement from the 12Mt that was out in October, but it’s still significant.

“While gas prices have come off, there is still a huge amount of volatility and it’s this volatility that impacts the decisions of producers running or not. We have seen urea and UAN prices coming off over the last few weeks of December, but ammonia and ammonium nitrate remain very high.”