FALLING fertilizer prices have stalled demand in Europe at what is usually a peak time for buying the plant nutrients needed for next year's crops.
As phosphate and urea-based fertilizer prices have tumbled, demand has "dried up," said Joost Hazelhoof, fertilizer analyst at Rabobank in the UK. "A lot of big buyers have sufficient inventory for their needs and are stepping back from the market."Fertilizer prices usually lag agricultural commodity price moves by a couple of months. Chicago corn and wheat futures have almost halved their values since June and this is now filtering through to the fertilizer markets.
And with no sign of the downtrend in grains being reversed, buyers are anticipating fertilizer prices will fall further.
Last week, spot market prices for Black Sea urea fell to around $580 a metric ton from around $800/ton in August. Phosphate dropped to around $940/ton from $1,300/ton in August.
In the difficult credit environment buyers will want to minimize stocks to reduce their credit needs and source fertilizer much closer to when it's needed, said Hazelhoof.
The growth of the precision farming industry, where technology is used to enable a farmer to identify the variance within their lands fertilizer needs, is also causing some demand destruction for fertilizers, said Simon Parrington, managing director of precision farming company SOYL Ltd.
"Farmers are definitely moving to using technology and information for fertilizer application," he said.
Parrington anticipates SOYL's sales will grow by around 50% in 2008 - a dramatic increase from the steady 30% growth the company has achieved in recent years, as a result of the rises in fertilizer prices over the past 12 months.
- Dow Jones Newswires
