07 Feb 2017
Fertiliser Market UpdateGrain
BRIEFING NOTE ON FERTILISERS
6 FEBRUARY 2017
CAN Price increase 30 Jun 2016 – 12 Jan 2017 – €/t €64
CAN % Price increase 30 Jun 2016 – 12 Jan 2017 – 43%
• The continued rise in input costs coupled with static or falling commodity prices is eroding EU farmers’ incomes.
• This cost price squeeze has resulted in the deterioration of the terms of trade for EU farmers and is affecting the competitiveness of EU agriculture.
• Fertiliser, according to Eurostat, is one of the most significant input costs for European producers estimated at €19.2bn in 2014.
o For many countries, it is the single biggest cost.
o For Irish farmers, it is the 2nd biggest expenditure item estimated at €565m both in 2014 and 2015.
• Agricultural Input Cost Indices (1995-2016) from many EU Member States including Ireland shows that fertiliser prices have increased at almost double the rate to other inputs over the last 2 decades.
• This is as a result of protection measures afforded to domestic EU fertiliser manufacturers who operate in a highly-concentrated market.
o Customs tariffs of up to 6.5%
o Anti-dumping duties on ammonium nitrate – ranging from €28.88/t to €47.02/t
• The consequence is a clearly dysfunctional market due to the non-existence of competition.
• The International Food Policy Research Institute (IFPRI) study commissioned by IFA last February clearly demonstrates that:
o The EU fertiliser industry has high levels of concentration.
o EU fertiliser prices are among the highest in the world.
o The abolition of tariffs and duties on non-EU fertilisers would generate €1bn in savings to EU farmers creating a minimum of 17,000 (worst case scenario) and up to 100,000 additional jobs mainly in the agri-food sector.
• The IFPRI report states that, “Based on the observed data, prices in Western European countries actually increased by 123%, while prices in Brazil decreased by 65%; this further suggests that additional factors, such as price fixing and cartels, might be operating in highly concentrated markets such as Western Europe and calls for the need to further examine pricing behaviour and potential market power exertion in the industry. “
• Member State annual savings arising from the abolition of duties and tariffs.
o France €176m
o Germany €172m
o Poland €111m
o Spain €107m
o UK €96m
o Italy €56m
o Ireland €32m
• The application of customs tariffs and non-EU fertiliser imports coupled with anti-dumping duties on ammonium nitrate from Russia is putting EU farmers at a significant competitive disadvantage.
• This is clearly evident in the world grain market where the EU’s main competitors (e.g., producers in the Ukraine and Russia) have access to cheaper fertilizer.
• In recent years, grain from the Baltics / Black Sea region has become increasingly competitive, displacing grain from traditional origins such as France etc. in key export markets.
• In light of the rapidly deteriorating terms of trade for EU farmers, the Commission must remove the anti-dumping duties and customs tariffs on non-EU fertiliser imports.
• EU farmers did not reap the full benefit from the fall in fertiliser prices last season as the price drop came in the latter part of the year when many farmers had purchased the bulk of their requirement.
• In recent weeks EU manufacturers, have pushed through significant wholesale price increases for ammonium nitrate (AN) and calcium ammonium nitrate (CAN):
– CAN (France) + €72/t
– CAN (Germany) + €64/t.
• In summary prompt and decisive action is needed by the EU Commission to eliminate of anti-dumping duties and customs tariffs as:
o EU fertilizer producers’ profitability grows year on year while farmers’ incomes decline
o Substantial and sustained price decreases in energy only partially being reflected in farm gate fertiliser prices.