In a letter to the EU Commission, IFA President Eddie Downey and Inputs Project Team Leader James McCarthy have called on the Commission to initiate an investigation into fertiliser prices as a matter of urgency. CAN manufacturers continue to push through price increases at a time when the price of their main input cost, namely natural gas, has decreased by over 30%.
Mr McCarthy said, “Agricultural production is sensitive to changes in energy prices, either through energy consumed directly or through energy-related inputs such as fertilizer. Ammonia used to produce urea and CAN are particularly energy dependent. The transformation of atmospheric nitrogen into ammonia is energy intensive. International studies have shown that natural gas accounts for 72%-85% of ammonia production costs. Average wholesale gas prices for 2014 fell in excess of 30%. Paradoxically wholesale CAN (calcium ammonium nitrate) and urea prices are bucking this trend. Instead of decreasing wholesale CAN prices are up 4% on 2014 and forecast to go a further 3%.
“Primary agriculture and food associated businesses are critically important to the Irish and wider EU economy. Despite a 30% increase in the value of farm gate output over the last five years, retained farm incomes have remained largely static. This is due largely to a sustained and substantial increase in input costs and a significant reduction in direct payments to the sector. Since 2007, expenditure on inputs has increased by 22%, from €3.1bn to €3.8bn, while direct payments have fallen by more than 20%, or close to €500m.“
“It is clear that changes to EU regulations are needed to address market concentration and the unbalanced power held by a small number of multinational input suppliers. The Irish Government and agri-food industry must engage with the EU Commission to tackle the major cartels controlling, in particular, the supply and price of fertiliser.”
Welcoming Commissioner Hogan’s commitment to IFA to raise the disparity on input pricing with his colleague, Commissioner for Competition, Margrethe Vestager, Mr McCarthy said, “It is paramount that any activities by manufacturers which potentially breach competition are investigated by DG Competition”.