Ammonium Nitrate fertiliser prices have stayed firm at £390/tonne through December of 2008. It is not surprising to hear that fertiliser traders and manufacturers are advising farmers to continue buying to secure supplies – well of course it’s not surprising, they are trying to sell as much product as possible before the price crashes!
Ian Moseley (fertiliser manager for Wynnstay) was quoted in the Farmer’s Weekly as saying “Although the price of urea has collapsed, ammonium nitrate has stayed firm at £390/tonne for December.” And saying of urea prices “It’s dependent on the Asian markey, which usually starts buying in January”. He warned that if farmers delayed purchases, there was a danger that farmers could be left waiting for deliveries in spring, and talking of delivery said “If this suddenly gets pushed into February, then there won’t be enough stock or sufficient transport facilities to meet demand”.
Well it is the view of Farmingfriends that any fertiliser manufacturer or trader should take a beginners course in economics – simple supply and demand economics suggest that fertiliser manufacturers will have been producing product to maximum capacity to try and capitalise on the grain price 5 months ago. Now that the global grain price has fallen to less than half what it was at its peak, then demand for fertiliser will also fall. The fall in demand will be compounded by the fall in oil price, meaning that oilseeds will be in lower demand for biodiesel production (reducing fertiliser demand).
Farmers will look to reduce fertiliser application rates in the spring, possibly by as much as 25%. We all know that ammonium nitrate doesn’t store well from one seaon to the next, so if manufacturers do not move product in spring 2009, they will be left with deteriorating stock.
So the prediction is that prices will fall for AN as they have done with urea due to falling demand, falling oil prices (reducing production costs and demand) and stockpiles of product at plants, docks and distribution warehouses.
The supply industry has been feeding the media, scaring farmers into making purchases at inflated prices since early summer, which can only be described as underhand – as they must have seen the price falls coming. On this farm we predicted what was happening and have not bought any fertiliser yet for 2009. It is clear that any farmers who haven’t yet purchased will be holding out for an avalanche of price falls. We expect ammonium nitrate prices to fall below £200/t and comparing historic nitrogen and grain prices we could even see nitrogen sub £130.
The best price will come to those who wait!