The fertilizers prices have not been so high for many years. But while grain prices are falling again, the arable farmers have to spend more and more money on fertilizer. Read why this is so.
In June, fertilizer prices continued to rise steeply – although purchase prices in the northern hemisphere were actually falling at this time. But that is out of the question this year. All important trading centers reported exploding fertilizer prices in June – which the arable farmers will probably have to pay to us in a very short time.
For phosphorus fertilizers, the prices on the spot market climbed to their highest level in 13 years in June. The prices of urea and other nitrogen fertilizers rose to a nine-year high. Buyers also had to spend significantly more money on potash fertilizers. “Fertilizer Prices skyrocket,” said an American analyst, short and to the point. The World Bank price index for the most important mineral fertilizers traded on the world market climbed to its highest level in 8 years in May and will reach a new high in June.
The search for the reasons for the price explosion
But what are the reasons for this extraordinary and not expected by many analysts extreme increase in the price of one of the most important means of production in agriculture. Two factors that are mentioned again and again certainly play a major role: On the one hand, the very high grain prices . And secondly, the sharp rise in energy costs . Yes, you have to say – the high grain prices certainly boost the demand of the arable farmers in normal times. And of course, the steep rise in energy prices also makes the production of mineral fertilizers more expensive. But that alone is certainly not enough to explain the huge rise in fertilizer prices .
Because if you look at the development of grain and fertilizer prices since last summer (according to data from the World Bank), wheat prices on the world market rose by 35 percent from June 2020 to May 2021, corn prices have doubled and soybeans have increased Paid 75 percent more. During the same period, urea more than doubled its price on the world market. The prices for phosphorus fertilizers even rose almost two and a half times. And there is still no end in sight – while grain prices have been falling again for some time. That means: The costs easily eat up the proceeds .
The cost explosion was also fueled by the steep rise in energy prices – which are the most important cost factor in the manufacture of fertilizers. Here the World Bank reported an increase of 80 percent from June 2020 to May 2021 – also an important driver for rising fertilizer prices.
Broken retail chains and severe turbulence
The highest DAP prices for thirteen years were reported on the world market in June.
In the US Gulf, DAP costs USD 621 per ton in June – that is another USD 50 more than in May!
But these two factors – grain prices and energy costs – are not enough on their own to get prices so high. A third aspect has a massive impact on the fertilizer market – which is also causing severe turbulence in other areas of the economy: namely the interrupted and still non- functioning supply chains – especially between China and the rest of the world.
The fact is: China is one of the most important global suppliers of primary products, chemicals and various active ingredients. When it comes to mineral fertilizers, the Middle Kingdom is by far the largest manufacturer in the world for both urea and phosphorus. In the case of nitrogen, exports have declined in recent years – in favor of a better supply of the domestic market and the modernization of production. When it comes to phosphorus, however, the Chinese are still by far the largest exporter.
To be honest, however, it has to be said that Corona has not only led to interruptions in supply chains and problems in trade with China . In other important production and export regions, too, there were massive problems in maintaining logistics and adequately supplying their own domestic market. These massive difficulties are now all on the table again, because on the one hand the global economy is currently growing strongly – and with it the need for preliminary products. On the other hand, these activities are fully slowed down by the interrupted supply chains and the renewed exacerbation of the transport problems.
The result: The costs for the transport and all scarce goods rise steeply. Also for fertilizer. It becomes clear that the dramatic consequences of the ship jam in theSuezkanal und erst recht durch die aktuelle Blockade des Containerhafens Yantian in Südchina. Analysten halten es für realistisch, dass die Probleme noch bis zu 12 Monate dauern können – bis sich die Lage allmählich wieder normalisiert. Sicher ist das aber nicht.
This also means that the prices for many products traded on the world market – such as mineral fertilizers – will remain very high for a long time to come.
