While improved demand and global growth prospects are driving agricultural commodity prices, agricultural input prices have also been on an upward trend.
The Central Statistics Office (CSO) reflected year-on-year increases of 17% in both fertiliser and energy in June 2021, with the main upward trend taking place from the start of 2021.
Straight fertilisers, such as Calcium Ammonium Nitrate (CAN) and urea, are reported up almost 24% in that period exceeding most expectations.
However, the overall composite trend data from CSO somewhat masks the individual farmer experience. For example, those who bought CAN last autumn at €180/t are now facing a price almost 80% higher.
The key global fertiliser producers report low stocks and limited supply growth as key factors driving price. They also claim that fertiliser raw material costs increased sharply, as input manufacturing cut backs due to Covid-19 limited supply. In addition, there was strong growth in energy prices, with oil recovering from the lowest point in the past decade.
All report improved demand on the back of increased agricultural commodity prices as also having an impact. The result has seen fertiliser prices trade upwards.
While there is no immediate manufacturing capacity constraint in responding to increased demand, it is likely to take some time to ramp up supply, according to global producers. New plants are due to come on stream in 2022.
The increased cost of global shipping is also likely to boost the cost of importing. At this point, prices show little sign of weakening significantly into 2022. Global fertiliser supply-demand balance is currently tipping in favour of the global manufacturers.
Together with higher energy prices, it looks like we may be entering a period of increased fertiliser prices.
It is at this time of year that many farmers make decisions to purchase fertiliser for the coming season. While prices increased steadily in 2021, those farmers who had bought forward in the back end of 2020 and early 2021 were relatively unaffected by rising prices. For many, the full effect of higher prices will be realized as they purchase for the coming season.