Fertiliser market price rise: wait or buy now?

High energy prices are affecting many companies and large factories cannot escape them either. Fertilizer producer Yara explains what the consequences are, not only of the high gas price, but also of a long-standing shortage of raw materials. What everyone wants to know in the meantime: is it better to wait until prices start to drop, or to anticipate further price increases and buy now?

Yara explains that prices are rising "everywhere": whether it is nitrogen fertilizer, phosphate fertilizer, or potassium fertilizer, prices all increased. The cause of these increases is quite diverse; according to the producer, it has to do with increases in raw materials such as gas, sulphuric, and phosphoric acid, container shortage, and many more reasons. 

Higher price for nitrogen
The nitrogen market operates on a global level, so many factors influence the price. Yara discusses a few.

Cold weather in spring: the first is limited to Western Europe. Due to the cold spring, the demand for nitrogen fertilizers for farmers started late. As a result, demand continued later in the season, keeping the price high.

The global grain price: the price of grain has an effect on the price of nitrogen fertilizers. A high grain price motivates farmers all over the world to get the most out of their grain, so, whenever possible, extra investments are made in nitrogen. At the moment, prices for grain are high. Demand is high, as the bottom of last year's stocks is in sight. In fact, the demand is so high that the new harvest has limited to no effect on prices. The weather conditions are also pushing up prices at the moment, as North America is suffering from drought and Europe is seeing a wet autumn.

The gas price: one of the most important indicators of nitrogen prices is the energy price, particularly the gas price. In August 2020, the gas price was between 1 and 2 USD, but in August 2021, the gas price was between 14 and 15 USD. Based on this alone, it is easy to imagine that prices for nitrogen fertilizers will not fall sharply in the short term, but rather rise or at least stabilize.

Raw material prices: Yara points out that both agricultural media and 'mainstream' media report on expensive raw materials. 

Increased demand for phosphate from the US
Phosphate fertilizer prices increased considerably at the end of the second quarter of this year, partly due to increasing demand. Currently, the market seems to be stabilizing and there are signs that enough fertilizer is available to meet the current demand.

However, the level of demand for (phosphate) fertilizers in the United States for autumn application will have a major impact on the target prices on the market in the fourth quarter of 2021 and the first quarter of 2022. The relatively high crop prices indicate that significant amounts of phosphate can be purchased by farmers.

Sanctions push up potassium prices
Potassium prices on spot markets around the world rose to even higher levels in July following the EU's announcement of sanctions against Belarusian potassium exports. This, too, is affecting the global market: suppliers secured higher value sales in Q3 worldwide.

In Brazil, a new strong emerging spot market, the last big price increases seem to have been driven by sentiment. Meanwhile, the price level in a large number of MOP markets (the potassium salts market) has returned to the level achieved in the infamous years 2007 and 2008. Whether a new 'bubble' is on the horizon is and remains difficult to say.

Source: Yara

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