A perfect storm is perhaps the easiest summary of current goings-on in the fertiliser industry.

At the Irish Tillage and Land Use Society meeting last week, Liam Woulfe, managing director of Grassland Agro, explained that as things stand currently, shipping is up 300%, pallet cost is up 60%, packaging materials are up 40% and transport is up 10%. And that is before mentioning the higher cost of gas.

However, the increased prices are still most attributable to the cost of the ingredients used to make up fertilisers.

He pointed out the significant change in prices that have taken place since the end of last year but, in particular, since the second half of this year. Some of these price changes in international trading markets are shown in Table 1.

These items are traded internationally in US dollar terms and the fact that the dollar is strong is helping to reduce the overall impact of these prices in Irish fertiliser cost terms, even though it may not seem like that currently.

Costs and impact

It is important to remember that the prices shown in Table 1 are the international prices that pertain at the point of putting bulk product on to ships.

There are many other costs that apply after that such as sea and road transport, packaging, pallets, etc, and all of these are also up.

Liam said that these, plus currency conversion, would equate to bagged urea in Ireland costing around €1,060/t currently.

The fact that prices have been increasing since the second half of this year left all in the trade uncertain as to what to do. Normally, prices weaken as demand slows but waiting for that to happen meant that prices just kept on rising and that is continuing. He pointed out that this is a huge risk for two major reasons:

  • If the price were to fall when the stock was in the traders’ yard, the suppliers would be left carrying the cost and that could be ruinous at these price levels.
  • Not acting up to now could mean that product would not be available in springtime due to production and logistical challenges.
  • Inventories

    These events have conspired to result in lower amounts of nitrogen products in stock now than at the same time in normal years. Suppliers would want to have 75% of their annual requirement in stock by March, but this may not be logistically possible due to the challenges with shipping availability at the moment.

    Liam suggested that total fertiliser stock is probably only 50% that of a normal year, but he also expects total requirement to drop by up to 20% due to the higher costs. He thinks that nitrogen product stocks are currently about 30% lower than they would be in a normal year.

    Fertiliser market outlook

    In looking towards the future, he pointed out that high crop prices are always a stimulus for high fertiliser prices but that the converse is also true. Roughly 70% of global fertiliser use is on crops, which is opposite to Ireland, where 70% is used on grassland. However, while tillage and horticulture is only about 8% of the land mass in Ireland, it accounts for an estimated 21% to 22% of Irish fertiliser use.

    For this reason Liam said that if global crop prices were to ease back, fertiliser use would quickly fall and this is likely to be reflected in price levels.

    While the situation that we see today is unlikely to be permanent, Liam said that it is impossible to know when it will change.

    “We did not see this coming and we do not know when it will end,” he said.

    But as things stand, he thinks that any major change seems unlikely until the end of 2022 or even into 2023.

    Fewer options

    Asked if there are likely to be fewer blend combinations available for the coming season, Liam replied that that seems likely.

    He emphasised that this would not be because of any policy change but rather that they would depend on the availability of specific ingredients, which may not always be available when they are needed.