Last week, the EU published its plan to ensure the availability and accessibility of fertiliser.
However, it failed to meet the expectations of farmers, fertiliser producers and environmental NGOs, all of whom have criticised the EU’s approach.
They say it won’t increase the availability or address the price of fertiliser in the current season.
However, one new proposal in this communication that should certainly be welcomed is the establishment of an EU market observatory for fertilisers in 2023 to share data on production, use, prices and trade.
Similar observatories are already in place for farm outputs including milk and meat. As profits of global fertiliser producers have soared, more transparent market data would strengthen the position of farmers who have borne the brunt of the current fertiliser crisis. Irish farmers, paying above the EU average for fertiliser, would certainly benefit.
Transparent data must determine market support
Currently, there is no public data on stocks held by the fertiliser industry, farmers and producer organisations.
Real-time data would give farmers greater power when deciding when and how much fertiliser to purchase.
The current obscurity is likely conducive to producers and the supply chain profiting at the expense of farmers.
It is almost nine months since Russia invaded Ukraine, sending energy and fertiliser markets into crisis.
While there have been repeated calls for public support from the fertiliser industry and farmers alike, no national or EU inventory of fertiliser stocks, usage and deficits has been developed.
It would also be required to determine what public supports are necessary.
The EU Temporary Crisis State Aid Framework has been adjusted to facilitate member states in directing supports to fertiliser producers and farmers in purchasing fertiliser, where necessary.
While this will not be feasible for all member states, use of this framework should be driven by objective public data. Otherwise, it risks supporting the already increased profits of global fertiliser producers and effectively distorting the market.
Irish farmers paying more for fertiliser
The data that does exist raises questions about the price Irish farmers, in particular, have paid for fertiliser this year. Eurostat fertiliser price indices for the EU 27 indicate that Irish farmers are currently paying above the EU average for fertiliser.
The data shows that in 2022 Irish prices deviated from the trend of the previous two years where they tracked below the EU average to now trending above the EU average (see Figure 1).
EU proposes suspending fertiliser tariff
Another measure proposed by the European Commission is suspending the import tariff on urea and ammonia, from which nitrogen is produced, until the end of 2025.
Ensuring a viable European fertiliser production industry is critical for the agri-food sector and European food security
The 6.5% tariff is in place to protect European fertiliser producers.
Earlier calls to suspend the separate anti-dumping duties on urea ammonium nitrate (UAN) imposed against Russia, US and Trinidad and Tobago were not supported by the Commission.
Ensuring a viable European fertiliser production industry is critical for the agri-food sector and European food security.
This is likely to be a key consideration for the EU on deciding whether to suspend tariffs, particularly given the recent mistakes in energy policy which resulted in a dependence on Russian energy.
Profits surge for fertiliser producers
Fertiliser producers who are supported by EU tariffs and duties are currently not just surviving this crisis, they are thriving.
Fertiliser producers globally including CF Industries, ICL Group and Mosaic have reported surging profits, largely arising from increased prices which in many markets are pushing fertiliser beyond the reach of primary food producers. Europe is no different.
European-based Yara, one of the largest fertiliser producers in the world, reported profit growth of 82% for the first three quarters of 2022 compared to the same period last year.
The company reported profits (EBITDA) of US$3,894m (€3,971m) for the first three-quarters of 2022 compared to US$2,135m (€2,177m) in 2021. This mainly reflects improved margins, with higher selling prices more than offsetting increased production costs, lower deliveries and increased fixed costs.
In Europe, higher fertiliser prices more than offset increased production costs according to Yara.
In fact, Yara’s results indicate that demand destruction in the nitrogen market has been lower in Europe than in other markets.
It reports that deliveries are down 26% overall but only down 6% in Europe compared to 35% in the Americas and 28% in Asia and Africa. This presumably reflects greater affordability in European farming as a result of higher output prices.
While farmers may be disappointed at the lack of immediate targeted cost reliefs for fertiliser, the importance of the proposed fertiliser market observatory should not be overlooked.
Global fertiliser producers have delivered significant shareholder returns and increased profitability this year, at a time when global food insecurity grows and fertiliser use globally has decreased. This comes while the focus on corporates’ environmental, social and governance credentials has never been greater.
Greater transparency in this market would benefit farmers and moderate some of the sentiment that drives surging profitability within the sector.
Last week, the EU published its plan to ensure the availability and accessibility of fertiliser.
However, it failed to meet the expectations of farmers, fertiliser producers and environmental NGOs, all of whom have criticised the EU’s approach.
They say it won’t increase the availability or address the price of fertiliser in the current season.
However, one new proposal in this communication that should certainly be welcomed is the establishment of an EU market observatory for fertilisers in 2023 to share data on production, use, prices and trade.
Similar observatories are already in place for farm outputs including milk and meat. As profits of global fertiliser producers have soared, more transparent market data would strengthen the position of farmers who have borne the brunt of the current fertiliser crisis. Irish farmers, paying above the EU average for fertiliser, would certainly benefit.
Transparent data must determine market support
Currently, there is no public data on stocks held by the fertiliser industry, farmers and producer organisations.
Real-time data would give farmers greater power when deciding when and how much fertiliser to purchase.
The current obscurity is likely conducive to producers and the supply chain profiting at the expense of farmers.
It is almost nine months since Russia invaded Ukraine, sending energy and fertiliser markets into crisis.
While there have been repeated calls for public support from the fertiliser industry and farmers alike, no national or EU inventory of fertiliser stocks, usage and deficits has been developed.
It would also be required to determine what public supports are necessary.
The EU Temporary Crisis State Aid Framework has been adjusted to facilitate member states in directing supports to fertiliser producers and farmers in purchasing fertiliser, where necessary.
While this will not be feasible for all member states, use of this framework should be driven by objective public data. Otherwise, it risks supporting the already increased profits of global fertiliser producers and effectively distorting the market.
Irish farmers paying more for fertiliser
The data that does exist raises questions about the price Irish farmers, in particular, have paid for fertiliser this year. Eurostat fertiliser price indices for the EU 27 indicate that Irish farmers are currently paying above the EU average for fertiliser.
The data shows that in 2022 Irish prices deviated from the trend of the previous two years where they tracked below the EU average to now trending above the EU average (see Figure 1).
EU proposes suspending fertiliser tariff
Another measure proposed by the European Commission is suspending the import tariff on urea and ammonia, from which nitrogen is produced, until the end of 2025.
Ensuring a viable European fertiliser production industry is critical for the agri-food sector and European food security
The 6.5% tariff is in place to protect European fertiliser producers.
Earlier calls to suspend the separate anti-dumping duties on urea ammonium nitrate (UAN) imposed against Russia, US and Trinidad and Tobago were not supported by the Commission.
Ensuring a viable European fertiliser production industry is critical for the agri-food sector and European food security.
This is likely to be a key consideration for the EU on deciding whether to suspend tariffs, particularly given the recent mistakes in energy policy which resulted in a dependence on Russian energy.
Profits surge for fertiliser producers
Fertiliser producers who are supported by EU tariffs and duties are currently not just surviving this crisis, they are thriving.
Fertiliser producers globally including CF Industries, ICL Group and Mosaic have reported surging profits, largely arising from increased prices which in many markets are pushing fertiliser beyond the reach of primary food producers. Europe is no different.
European-based Yara, one of the largest fertiliser producers in the world, reported profit growth of 82% for the first three quarters of 2022 compared to the same period last year.
The company reported profits (EBITDA) of US$3,894m (€3,971m) for the first three-quarters of 2022 compared to US$2,135m (€2,177m) in 2021. This mainly reflects improved margins, with higher selling prices more than offsetting increased production costs, lower deliveries and increased fixed costs.
In Europe, higher fertiliser prices more than offset increased production costs according to Yara.
In fact, Yara’s results indicate that demand destruction in the nitrogen market has been lower in Europe than in other markets.
It reports that deliveries are down 26% overall but only down 6% in Europe compared to 35% in the Americas and 28% in Asia and Africa. This presumably reflects greater affordability in European farming as a result of higher output prices.
While farmers may be disappointed at the lack of immediate targeted cost reliefs for fertiliser, the importance of the proposed fertiliser market observatory should not be overlooked.
Global fertiliser producers have delivered significant shareholder returns and increased profitability this year, at a time when global food insecurity grows and fertiliser use globally has decreased. This comes while the focus on corporates’ environmental, social and governance credentials has never been greater.
Greater transparency in this market would benefit farmers and moderate some of the sentiment that drives surging profitability within the sector.
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