Press Release - Farmers buying fertisliser should hold their nerve on price

Farmers buying fertiliser should hold their nerve on price.

Farmers are being softened up by the big distribution companies for a lift in fertiliser prices later this month, says the National Beef Association, but at the same time established buying groups expect to continue to offer nitrogen and urea at a substantial discount.

And its members in Northern Ireland are among those who find it impossible to reconcile these contradictory price movements without concluding that further lifts in the cost of fertiliser will be the result of naked market manipulation.

“The major distributors should be dropping their prices as the peak purchasing period approaches instead of angering their customers by insisting that further rises cannot be avoided, “ explained the NBA’s Northern Ireland council members.

“Fertiliser costs inflated by 170 per cent over 2008 and singlehandedly forced an 18-20 per cent rise in the overall cost of running typical beef farm that has endangered future development of the entire UK beef sector.”

“Hopes that fertiliser purchases would be less of a burden on the industry over 2009 rose two months ago as prices for all the main categories continued to ease and a repeat of the eye popping lift in costs forced on farmers last year appeared to be receding.”

“However the warning signs are already flashing with lifts of at least £15 per tonne on all categories well flagged for February and warnings that some manufacturers have decided not to buy in fresh supplies of N, P and K for blending in what looks like a deliberate attempt to keep the market short and   raise their margins by pushing through unnecessary, price increases over March and April too.”

This is worrying the NBA because most farmers have still to commit themselves to spring fertiliser purchases and it is finding it hard not to conclude that most distributors prefer to introduce an easy lift in profit margins rather than create the best possible conditions for buyers.

“How else can the £100 per tonne disparity that already exists between buying group members who are paying £195 a tonne for urea and the £280-£300 a tonne, or more, that is being charged by the big companies be explained.”

“Some of the biggest distributors are saying that although the fertiliser market has been unusually soft over January supplies, particularly for urea, are about to be squeezed as a result of increased demand in the US, stronger purchasing in the EU and a lift in the export tax levied by China.”

“But this has not prevented the emergence of two price tiers which clearly show that participants in one selling system are able to purchase fertiliser for substantially less than those are committed to the alternative – which is in turn driven by companies want to raise prices instead of doing their best to keep them down.”

“Farmers should negotiate heavily on price and not be manipulated into paying more for fertiliser than they should do. Urea sold outside buying groups is overpriced already and demand for potash is not as strong as sellers insist it is because many analyses point to there being sufficient reserves in the soil at present.”

For more information contact:

Kim Haywood, NBA director.  Tel.  0131 336 1754