WILL INPUT COST INFLATION IMPACT UK & WORLD CROP PRODUCTION?

Sébastien
23 Sep 2021

Inevitably, the rise in fertilizer prices will significantly increase farmers’ production costs, along with potential supply problems for some products. Soaring gas prices had forced the closure of two large UK fertilizer plants, sparking warnings of a looming shortage of ammonium nitrate. In recent days, following UK Government intervention, one of these plants will re-open, initially for a limited period. Feedback from growers suggests they are  reviewing the rate of product they will apply. 

How bad is the situation? Is the rest of the world ag industry similarly impacted? Could this affect both yields and acreage?

AN prices are up by about 70% on last year’s market level and keep on climbing. Imported AN prices are not far behind, and urea is firming fast. Fertilizer commodity prices have risen this year on strong demand and the UK’s reliance on P and K imports, along with higher shipping and haulage costs. The high prices are likely to result in last-minute demand close to time of use, bringing warnings from suppliers on logistics challenges, which will be made worse by the shortage in driver capacity.

We hear of similar problems on the Continent and in South America. Everywhere costs are soaring dramatically and supplies to our industry are extremely tight. 

We knew that UK and World grain stocks were going to remain tight throughout the new season. We also know that our crop prices would very much rely upon weather conditions yet again this season.  However, we had not anticipated this new element. 

At this stage, we can only anticipate that farmers, all around the world, will consider higher costs and supply issues as a new risk. They will need to adapt using new agronomic techniques, less inputs and probably concentrate their operations on their most productive land. In any case grain and oilseed prices will need to compensate for this situation.  

Another supportive element for prices?   

 

Sébastien Mallet 

ODA UK