Fertiliser prices look set to rise steadily over the coming months as new crop returns remain sufficient to sustain global demand.
With the price of bagged UK-made Ammonium Nitrate (AN) rising from a near four-year low to £260-265/tonne at the start of September growers are being encouraged to lock-in to current prices before they rise further.
“I understand why some growers are reluctant to commit at current prices. What is a fair price is often an emotive point, but when considered in relation to the forward price of wheat for next harvest, today’s fertiliser prices look realistic,” says Openfield national fertiliser manager Graham Colledge.
London feed wheat for November 2015 is trading in the region of £130/tonne compared with a spot price of about £117/tonne for the current crop year.
“Fertiliser is truly a global market and prices are not always related to UK wheat prices. In addition to the laws of supply and demand we also have to consider the continuing situation in Ukraine and the Middle East. Both are major suppliers in either raw materials or finished products and events there have the potential to disrupt the market,” adds Graham Colledge.
AN prices moved up about £4/tonne at the start of the month and he believes prices are likely to maintain this upward path over the next few months and, possibly, into the New Year.
“Up until recently many growers have been hesitant to enter the market, but I would urge users to at least start covering their needs. It is better to at least do something rather than nothing,” he says.
Deciding what proportion of needs to cover at this stage in the season varies depending on the business requirements, but as a general rule Graham Colledge suggests growers “prioritise their need for nitrogen and sulphur products as the quality supplies tend to run out first”.
“Straight N requirements vary depending on cropping regime and farm policy, but in most cases it makes sense to have between a third and half of total requirements covered by the end of September. This can be managed within the business cash-flow and reduces the level of price risk exposure,” he says.
For those looking to hedge their market exposure Openfield has launched ‘Openprice’. This enables the grower to buy there fertiliser needs in one go, over several stages or spread throughout the year, but without having to accept delivery until it is convenient to do so.
“Openprice is unique in that it gives the grower complete flexibility as to when the product is delivered. Payment can also be planned to match cash-flow either through deferred terms or through finance depending on the product.”
Fertiliser finance has become vital to many growers and Openfield has developed its own scheme to help growers avoid having to sell grain simply to fund input purchases.
“Unlike manufacturer finance which is often only available for their own products, our scheme allows us to provide funding for all fertiliser products at an equivalent interest rate,” adds Graham Colledge.
