Fertiliser profits soar on back of high prices

Margins in the fertiliser supply chain (importers and merchants/co-ops) soared last year, increasing between 2.5 and five times, depending on the product.

The volume of fertiliser imports decreased by 10% last year on the previous year. The value of imports increased by over €500m, considerably increasing the risk and financial exposure for fertiliser importers.

However, Irish Farmers Journal analysis indicates significant margin growth within the supply chain as tens of millions in additional profits appear to have been generated.

Origin Enterprises, which owns Goulding Fertilisers, noted in its 2022 annual report that fertiliser delivered a strong financial and operating performance in 2022.

The company noted that it successfully navigated supply chain and pricing pressures. Irish Farmers Journal analysis indicates that the supply chain experienced significantly stronger financial performance than previous years.

While significant profits were generated on the back of rising global prices, there is adequate capacity for the supply chain to return lower prices to farmers as the market falls.

Central Statistics Office (CSO) data on the volume and price of fertiliser imports was analysed with detailed analysis of three products – urea, calcium ammonium nitrate (CAN) and 27-2.5-5 – presented. Together, they account for 83% of imports last year.

The fertiliser import season runs over a 12-month period from October in one year running to September of the following year.

CSO import prices do not include supply chain costs and margin. While costs increased in the first half of the 2021-22 season, they have moderated significantly since. This data relates to the overall market.

Buying patterns differ between individual fertiliser importers.

Profit margins on each of the three product lines analysed surged in comparison to the previous year.

While urea was bought for on average €765/t in the 2021-22 season, the average price paid by farmers between January and July (the main fertiliser sales season) was €1,028/t, according to CSO data. This generated a surplus of €263/t on average from which supply chain costs and profit margin are covered.

By comparison, in the 2020-21 season, urea was bought for on average €327/t and sold for on average €381/t (January to June CSO price).

The comparable surplus was €54/t.

On each 100,000t of urea traded at these prices, an additional surplus of almost €21m would have been generated last year over and above the previous season.

CAN was imported for on average €589/t in the 2021-22 season and bought by farmers for an average price of €827/t (January to July CSO price).

This generated a surplus of €238/t on average from which supply chain costs and profit margin are covered.

Not all imported CAN retails to farmers as CAN; some is used to produce other products

By comparison, a surplus of €61/t was generated in the previous year. CAN was imported for on average €212/t and farmers paid on average €273/t (January to July).

For each 100,000 tonnes of CAN traded at these average CSO prices, an additional surplus of almost €18m would have been generated over and above the previous season.

Not all imported CAN retails to farmers as CAN; some is used to produce other products.

27-2.5-5 was imported for on average €693/t in the 2021-22 season and bought by farmers for an average price of €911/t (January to July CSO price).

This generated a surplus of €218/t on average from which supply chain costs and profit margin are covered.

By comparison, a surplus of €92/t was generated in the previous year. 27-2.5-5 was imported for €279/t on average and bought by farmers at on average €371/t.

Each 100,000t of product traded at these average CSO prices would have generated an additional supply chain surplus of almost €13m over and above the previous season.

Urea

The volume of urea imports in 2021-22 at 369,148t (Table 1) was over twice the amount imported the previous year.

The average import price was €765/t. However, prices ranged from an average of €471/t in October 2021 to €1,001/t in May 2022.

Almost half of urea was imported between October 2021 and March 2022 at an average price of €689/t.

From January to July when the majority of urea is sold, the average price paid by farmers was €1,028/t. Imports in the second half of the season from April to September averaged higher at €841/t.

CAN

The volume of CAN imported in the 2021-22 season was down almost one-third on the previous year. CAN averaged an import price of €589/t during the season.

Similar to urea, prices varied significantly from an average of €291/t in October 2021 to €728/t in April 2022. Over half of the CAN imported for the season was imported between October and March at an average of €495/t. Farmers paid on average €827/t for CAN in the January to July period. Imports between April and September averaged €683/t.

27-2.5-5

The volume of 27-2.5-5 imported in the 2021-22 season was up almost 5% on the previous year to 353,268 tonnes.

The average import price of 27-2.5-5 during the season was €693/t with prices ranging from €356/t in October 2021 to €1,434/t in May 2022.

Almost three-quarters of the volume was imported between October 2021 and March 2022 at an average of €532/t. Just over one-quarter of the volume was imported in the second half of the season at an average of €855/t.

It’s not only the Irish supply chain that has profited. Major international fertiliser producers have reported record profitability over the past year as farmers have struggled with affordability.

Last week Yara, a leading global nitrogen producer, reported that full-year profits were up 71% to €4,610m ($4,959m) driven by higher margins, with higher prices more than offsetting increased production costs and lower deliveries.

Profits double

Similarly, Mosaic, one of the world’s leading potash and phosphate producers, saw its profits almost double in the third quarter last year with exceptional full year profits expected.

Global urea prices have collapsed since September 2022 and are now trading at more normalised levels.

Egyptian urea is now trading at the equivalent of €360/t, down from the equivalent of €855/t at the start of September.

According to analysts, the market is well supplied. However, buyers are standing back as prices continue to spiral downwards.

Prices of potash and phosphate have also slumped due to low demand.