Nitrogen market quiet – right time to buy?
NOW might be a good time to be buying granular urea, ahead of delivery through to January says the trade.
Any surplus on the global market has been ‘mopped up’ by India and the only way prices are going to move is upwards it is suggested.
However, increasing fertiliser prices through to March are normal, according to independent industry analyst Clwyd Jones of T.C. Jones Business Services, who says there is nothing on the horizon that would indicate a likelihood of either abnormal price spikes or crashes.
“There has been talk in the trade of international fertiliser nitrogen [urea prices] rising for several weeks now. So far there is very little evidence of this. However, normal seasonal demand will dictate that prices will increase towards the end of the year,” said Mr Jones.
He pointed out that domestic ammonium nitrate producers came into the market at around £170/tonne on-farm last June and were indicating around £200 by January 2010.
“On a unit for unit basis this would equate to granular urea at around £265/t on-farm at that time. However, granular urea is currently reported available at around £220 to £225/t on-farm, equating to ammonium nitrate at around £170/t, but urea prices will very likely firm towards the year end,” he said.
“Farmers making nitrogen purchases for next spring would do well to consider buying granular urea now. We are unlikely to see any turnaround in UK producers’ pricing strategy as they have likely already achieved planned volumes and will not undermine business already done, plus the fact wholesale gas prices - their main feedstock - will increase as winter approaches.”
He said UK wholesale gas prices had remained low, at around 25p per therm, some 60 per cent below the corresponding period for 2008.
Gleadell Agriculture’s fertiliser trader Callum Findlay said the key question now was how late the major buyers in the US and Western Europe would delay decision-making on pre-season inventory build. Stocks were low at distribution level and the UK market remained 10-15 per cent behind last year’s deliveries to farm at this time.
“With the total UK market expected to increase by 10-15 per cent as oilseed rape and wheat acreages increase, imported products will definitely feature heavily at some stage in the next six months.
“Granular urea remains the most cost effectively priced nitrogen, and today would appear to be an opportune time to buy,” said Mr Findlay.