Ammonium nitrate markets face a severe squeeze over the next few months as farmers continue to hold back from the market.

This lack of trade risks pushing the bulk of the season’s business into an impossibly tight timeframe, says Calum Findlay, fertiliser manager at Gleadell Agriculture.

Prices are already rising and there is an increasing risk that product shortages could follow, he advises.

“It is becoming very apparent that the nitrates market is facing a severe squeeze across the whole of Western Europe and that manufacturers are waking up to this fact,” says Mr Findlay. 

“In the UK nitrogen sales are 45% behind normal. Unless business picks up very quickly, about 1.7m tonnes of product will have to be delivered between October and March.”

That is not feasible, he adds. Domestic AN only covers 40% of demand, and the amount of tonnage that can arrive in the UK is restricted by COMAH (hazard) licences.

“Imports are also in short supply, compounded by Ukraine/Russia situation. And the Achema factory in Lithuania, the largest AN manufacturer in the Baltic states, is shutting one line of two for maintenance in early September.

“A far as substitutes are concerned, port agreements restrict granular urea imports and other products like UAN have grown slowly in the UK, so they are price followers not leaders.”

The longer farmers stand back, the more the market will be pressurised, Mr Findlay believes. “Prices are already rising from their current lows. GrowHow is indicating another rise this week and we expect a further increase as early as mid September.

“This stepped approach to price rises will continue while we see slow demand. In addition, ammonia prices are set to rise in FSU countries.”

Ammonium nitrate is currently a very good buy, he maintains. Prices remain at the lower end of levels seen over the whole of last year and are the same as they were in June, having traded sideways for over three months.

“Once volume buyers return, do not be surprised to see some larger increases implemented. We have seen a £10/t price rise on imported AN offers over the past 10 days,” says Mr Findlay.

He concedes there are some genuine reasons why farmers have not been buying, including cash flow problems, poor grain prices (and an expectation that fertiliser prices will follow), harvest pressures and cropping plans not finalised.

However, most farmers will have paid more last year than today, he adds. “Farmers need to adopt a risk management strategy when buying fertiliser, as with grain.

“Most growers are reporting good or very good harvest yields, which may help budgets. Finance is also available, which we believe will be cheapest long-term option this season.

“Manufacturers are starting to sense an opportunity so my advice is that farmer customers at least take some cover at these numbers.”

Market at a glimpse:

• Total N market 2.2m tonnes 2014/15.
• Nitrogen sales nationally are 45% behind normal.
• Only 15-20% of total N market concluded in UK by mid-August.
• Only 90,000t of imported AN has been sold June-August, despite low prices.
• August-Sept AN and N+S sales non-existent.
• 150,000t of granular urea has been traded (50% of total).