Fertiliser prices still high despite downturn in global economy

WHY are fertiliser prices so high in view of the fact that the cost of crude oil is much lower than what it was this time last year?

That’s the question Fine Gael TD Paul Connaughton posed to Agriculture Minister Brendan Smith in the Dáil.

He also asked what other factors influence the cost of fertiliser.

Mr Smith said changes in fertiliser costs, in common with all elements of intermediate consumption for farmers, are principally a function of market forces, primarily operating at international level in this instance.

The Central Statistics Office preliminary estimate for 2008 shows the price of fertiliser increased by 61.4% compared to 2007, which was an unprecedented rise.

This extraordinary price increase resulted, in part, from the high cost of oil in 2008 to manufacture fertiliser, upon which it is heavily dependent, and from high shipping costs resulting from increased global economic activity

It also stemmed from increased global demand for fertiliser for the production of biofuel crops, to replace high priced fossil fuels, and increased demand for fertiliser by emerging economies, such as India and China, to increase food output.

A further factor was an increased demand for fertiliser to increase animal feed stocks, which were low globally.

Mr Smith said the recent downturn in global economic activity and especially the lower oil price have reduced the transport and manufacturing costs of fertiliser.

Nevertheless, fertiliser prices have not fallen as quickly as expected, due mainly to the carryover of expensive stocks from 2008.

Since the closure of IFI in 2002, Ireland has no indigenous inorganic fertiliser production and as such is a “price taker”, being totally dependent on imports.

Furthermore, Ireland’s location on the fringe of Europe implies increased shipping costs and a lack of economies of scale as regards shipping.

Mr Smith said it should be remembered that it is still early in the season for fertiliser application onto crops and grass land.

Farmers are holding back making purchases in anticipation of price falls, which is why it is difficult to predict prices for 2009 at this early stage of the cropping year, as very little fertiliser has traded.