Will A Fertiliser Price Folllow Rising Grain Cost?

UK - There are fears in the beef sector that the recent, sudden, lift in grain prices will be followed by an equally sudden, but potentially much more damaging, rise in fertiliser prices, says the National Beef Association (NBA).
calendar icon 24 August 2010
clock icon 2 minute read

Over the past decade there is clear evidence that fertiliser manufacturers tend to raise their prices in line with lifts in grain value (higher grain incomes makes it easier for them to take the money) so there is an expectation in the industry that further rises in farm fertiliser prices are therefore imminent.

If this is correct it could persuade some beef farmers to cut down on inputs – which would result in having to keep grazing cattle for longer to sell at the same slaughter weight because pasture quality has deteriorated. Similarly silage yields in 2011 could fall making it more difficult, in the case of breeders, to maintain cow fertility – which would add to costs as well, said Hamish McBean, Chairman of the Scottish Council for NBA.

The only response to this is to realise that cutting back on sensible fertiliser inputs is the short cut to nowhere. It would increase overall production costs rather than reduce them – and beef farmers who reduce fertiliser applications are especially vulnerable to this.

However it may be that fertiliser ordered quickly will prove to be cheaper than fertiliser purchased later this year and members planning to maintain inputs, but at the same time save some money, could talk this over with their suppliers, who in many cases are also buying their grain.

Indeed there are signs that fertiliser prices are already being pushed up by fertiliser traders, with purchase books closed now for August because traders are hedging their bets with prices for autumn. Many farmers have not tied themselves into lower priced contracts yet.

Speculation about global demand trends should not automatically result in the two main UK fertiliser companies cashing in on farmers vulnerability by putting prices up, when they themselves have made good half year profits.

If fertiliser prices are held at a realistically price and don’t follow the grain prices up, more beef and cereal farmers will be in a position to buy the volume they need. But if companies seize on the opportunity and ramp the prices up, less beef farmers will purchase the fertiliser they need and this will have a long term negative impact on grass and beef quality.

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