The price of fertiliser is the only thing farmers are talking about right now.

In a year where we have had the new CAP unveiled at EU level in June and back home here in Ireland in October, the price of fertiliser is the only thing farmers are talking about.

This might be the year where the Climate Action Plan has been agreed, with legislation and sectoral targets that will change farming substantially, but the price of fertiliser is the only thing farmers are talking about.

The Nitrates Action Plan, live exports, eco schemes and Glanbia are all in the news, but fertiliser prices are the only thing farmers are talking about.

It’s not surprising. Price inflation on the scale we’re seeing is not normal. To put it in context, a lot of silage, grass and grain was grown last year with CAN at €185/t. This year, CAN had slipped up in price by €100/t, but farmers didn’t grumble too much.

Firstly, it was an excellent growing season so people felt they were getting a bang for their buck. Secondly, prices have been good all year across all commodities, and getting steadily better.

Thirdly, there was an acknowledgement that 2020 prices were close to the bottom of the cycle, and were always likely to rise.

But what has happened since September is outside any recognisable price cycle. CAN has exploded in price, more than doubling in a couple of months. Urea moved towards €900/t, compounds like 10.10.20 stretched towards €1,000/t.

This is a complete shock to farming. It transforms the economics of the sector at a stroke. At these prices, record grain prices won’t leave a margin. Dairy farmers will look anxiously at their bottom-line, even with milk routinely over 40c/l with bonuses taken into consideration.

Beef and sheep farmers are less exposed to this extra cost, but have less room to cope with higher costs. In fact, they have no room at all to cope with a doubling of a core input. High fertiliser costs will perpetuate high grain and feed prices, meaning pig and poultry farmers are in the same cost-squeeze as dairy sheep and beef farmers.

Currently there are videos widely circulating of large volumes of fertiliser in storage in a yard at an Irish port. The footage leaves farmers wondering if there really is a scarcity, or if there are stocks of product bought more cheaply that will deliver a massive margin to the wholesaler or merchant holding the product.

The video might blind watchers to the reality of the scale of the sector. Irish farming needs about 1.5m tonnes of fertiliser a year. If you translate that to pallets, you’d need 750,000 pallets (a million if it were all urea, as they typically consist of 1.5t as opposed to 2t per pallet for most fertiliser products).

To translate that to our video, you’d need to see pallets stacked three high, and 25 deep. And you’d need 500 rows of pallets three high and 25 deep on either side of the road to get 1.5m tonnes of fertiliser.

That’s a pretty stark image, but it has to be remembered that there’s about 4.4m ha of farmland to take that fertiliser.

It all adds up, as that equates to about a tonne of granular fertiliser for 3ha, or 8ac. That’s nitrogen, phosphorus and potassium, straights and compounds. Perhaps it's more accurate to say it used to add up. If these prices are sustained, it won’t add up for much longer.

It could be that fertiliser prices will come back pretty quickly in 2022. We are seeing natural gas prices slide in recent weeks. Having peaked at €120/megawatt hour in October, the European price is now about €90. To put that in perspective, the price never rose above €30 until earlier this year. Gas price, and gas availability, was one of the drivers of the surge in fertiliser prices.

Even if gas prices continue to fall, the global spike in COVID-19 cases is likely to disrupt supply chains in the coming months, so we have to be cautious about assuming that this spike is temporary and will quickly reverse itself.

Early demand

Whatever happens prices, farmers will need fertiliser in March, April and May. Many may hold off early nitrogen application, particularly if the weather is harsh and response is questionable. If weather is suitable for early slurry spreading, that might be the extent of nutrient application for January and February.

Lime has been applied in record amounts in the recent dry field conditions, more will be used next spring to maximise nutrient uptake (although not, of course, in tandem with slurry application; they are uneasy bedfellows).

Past that, crops and grassland alike will need feeding in the growing months of spring. About half of the year’s granular fertiliser requirement is normally in farmyards by Easter. That pattern might be delayed a little next year, but only by a couple of weeks.

The alternative possibility is that this price hike is going to set a new normal around the cost of what are finite resources.

It’s not just nitrogen we have to worry about either. Potassium and phosphorus have to be mined, Europe is vulnerable, producing only 3% of phosphates and 7% of potash. Europe consumes much more fertiliser than it produces, using about 10% of global production annually

As we reduce the volume of these resources, they will get dearer. Equally, the ownership of these mines is now in fewer and fewer hands. If they work together, the fall in prices will be much slower than their rise. Some analysts say we have 100 years of phosphorus left, others say it will be scarce before 2050 at current usage.

Which brings us to nitrogen. A byproduct of the fossil fuel industry, nitrogen is good value when oil is cheap, hence that €185/t price from last year. When oil is dear, nitrogen won’t be cheap.

And as the world tries to tackle climate change, with fossil fuels out of fashion, what is the medium-to-long-term future for nitrogen production?

It could be that the prices of the last couple of months won't last, but they could be a warning from the future as to the sustainability of farming based on high-input hugh-output systems.

Coping mechanisms

When the input in question is artificial fertiliser, and the prognosis is for multiple pressures on price in the long-term, we need coping mechanisms. The resistance to organic farming in Ireland means many are sceptical that the €260m committed to the organics sector in the next CAP will go unused, but two or three years of fertiliser prices would change that dynamic quickly.

Farmers looking askance at the option of planting 6% of their land to a multi-species sward will change their tune pretty quickly if CAN stays over €500/t for any period of time. Tillage farmers’ resistance to crop rotation, cover crops, and straw incorporation will evaporate if P and K prices stay where they are right now.

It could be that fertiliser prices will prove to be a catalyst for change. We certainly need to heed the warning from the future and do everything in our power to reduce our dependency on an input coming from outside the EU, with supply and price beyond our control.