Nitrogen prices soar as high gas prices shut down production
CF Industries Teeside plant © Ian Forsyth/Getty Images Nitrogen prices have taken another leap following the closure of CF Fertilisers UK’s two production plants because of record gas costs.
The closures were announced on 17 September, sending shockwaves through the food supply chain, which is dependent on the carbon dioxide by-product for many uses.
Following government intervention and taxpayer funding to support it for three weeks, it was announced on 21 September that the Billingham plant was to reopen. However, CF could not confirm when new ammonium nitrate supplies would become available
Aside from orders placed before the closure, only imported ammonium nitrate (AN) is available, with new business for September/October delivery to farm priced midweek at £470-£485/t.
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This was an overnight rise of £30-£40/t in a market where AN values were already at record levels on strong demand. Shutdowns due to other reasons – such as US production being disrupted by hurricane Ida and other storms – have added to the problems.
Until the closures announced last Friday, the trade had been expecting to hear new terms from CF for October.
Urea is available, but with prices increasing daily in a wild market. It had a price tag of about £490/t onto farm early this week, but by midweek that had risen to £505-£510/t for September/October delivery.
Julia Meehan of market analysis service ICIS said urea loaded for export from Egypt had jumped in price by US$100 (£73/t) in the week to Wednesday 22 September, to $585/t (£423/t).
India has a huge requirement for urea and recently put out a new tender, expected to be close to 2m tonnes.
Fractured trade
The trade has been thrown into disarray by the closure announcements, with Yara’s continental European AN production also being cut by 40% on high gas prices.
Analysts pointed out that other sources of carbon dioxide were emerging which, if they replaced traditional supplies, could also affect decisions on the resumption of AN production.
High demand for fertiliser, combined with gas costs, is also disrupting fertiliser raw material and product trade flows, making for a highly unpredictable market. One importer told Farmers Weekly: “We’re all chasing nitrogen products and I can see it [AN] being £500/t next week.”
Following Brexit, the UK has no agreement in place with Algeria, from where UK urea imports have previously come, pointed out Robert Gazely of consultant Ceres Rural. “We are now relying solely on Egypt for North African imports,” he said, adding that AN imports were behind “normal” levels, and that freight was costing far more than a year ago.
Revised cropping plans
Even before this latest move, high fertiliser prices were making some growers reconsider cropping options, including changing from autumn to spring sowing, a move to more pulses, and widespread P and K holidays. This is likely to be exacerbated by the latest price hikes, making overall demand for fertiliser more difficult to predict.
The high prices have also made for a slow order rate, with 40-50% of nitrogen requirements estimated to have been placed for the 2022 crop so far.
Haulage warning – crunch will get worse in run-up to Christmas
Haulage and logistics remain significant issues for farm supplies and produce movement.
Drivers are expected to be more heavily occupied from mid-November on moving Christmas food and other festive trade goods.
Kate Gibbs of the Road Haulage Association said: “Everyone will have to be a bit more patient as far as timing is concerned. The industry will do all it can to get goods through.”