Crop prices threaten European fertilizer demand

Fertilizer distributors in Europe are expressing increasing concern about the impact of low crop prices on demand in the coming season. Increases in fertilizer costs year-over-year strongly contrast declines in crop values and threaten to cut demand in 2014-15.

One major cooperative in France, Europe's largest fertilizer market, said it was planning for decreases of 30-50% in phosphate and potash demand. Others are saying NPK fertilizer demand could drop 20-30% as farmers seek to rationalize input costs. One of the ways farmers have cut costs in previous downturns is by skipping applications of phosphate and potash fertilizers for a year, spending their available cash to maintain nitrogen.

There is a similar picture in other European markets, with farmers in northwest Europe facing 20-25pc drops in cereals prices. UK feed wheat prices are around £100/t ($160/t) ex-farm, about £25/t below the estimated production cost. Oilseed rape prices in Germany are down about 16pc year-over-year, prompting forecasts of a 3-4pc fall in planted area this year.

In contrast, most fertilizer prices are higher than 12 months ago. The increases are most notable for phosphates, but nitrogen prices are also showing double-digit rises. CAN 27, for example, costs distributors in Germany and the Netherlands nearly €40/t ($50/t) more now than a year ago.

Phosphate prices are easing internationally, but currently a tonne of DAP in Germany is over 30pc more expensive than in October 2013 and demand is minimal. In Italy, importers are speculating that DAP sales will drop 10-30pc because autumn buying for use on wheat is unusually slow. Merchants in Spain estimate that DAP consumption could drop as much as 35pc in the autumn-winter season because of poor farm economics.

Depreciation of the euro, which has fallen nearly 7pc against the US dollar over the past year, has compounded the problem, raising the price for imported fertilizers.

Europe: Fertilizer and crop price changes

• DAP fca Belgium: up 32pc year-over-year to $536/t

• Granular urea fca French Atlantic: up 18pc year-over-year to $397/t

• CAN27 cif inland Germany: up 18pc year-over-year to $308/t

• UAN30 fca Rouen: up 13pc year-over-year to $252/t

• 15-15-15 cif inland Germany: up 4pc year-over-year to $401/t

• Wheat France: down 22pc year-over-year to $190/t

• Rapeseed Germany: down 16pc year-over-year to $386/t

me/tdf

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