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Europe’s energy crisis sparks a shutdown in fertiliser production

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Europe’s fertiliser business affiliation says greater than 70 per cent of the continent’s fertiliser manufacturing has been curtailed, as fuel costs skyrocket.

Russia is holding back supply, Europe is heading into winter, and fuel costs have elevated tenfold in comparison with final yr. 

Thomas Elder Markets analyst Andrew Whitelaw mentioned it was “a fairly scary scenario”.

“Fuel and vitality costs have gone completely bonkers and fertiliser vegetation are actually saying ‘we can not promote fertiliser primarily based on the enter value of this fuel’,” Mr Whitelaw mentioned.

“In order that they’re beginning to shutdown vegetation in Europe, which reduces a whole lot of provide from the worldwide market and that’s making [fertiliser] costs enhance dramatically.”

European gas price graph.
Fuel costs in Europe have skyrocketed.(ABC Landline)

CRU Group head of fertilisers, Chris Lawson, mentioned the scenario was unlikely to vary quickly.

“The price of producing nitrogen fertilisers, primarily ammonia, has skyrocketed in the previous couple of months,” he mentioned.

“Given the present scenario with Russia and its strategy to supplying Europe with fuel, it appears unlikely they will fall sharply quickly.”

He mentioned the United States and nations within the Center East and northern Africa have been seeking to ramp up their very own fertiliser manufacturing, which might alleviate among the shortfall.

“However we do not assume it is going to be fairly sufficient,” he mentioned.

Mr Lawson mentioned European governments have been shortly discovering out how necessary fertilisers have been to meals safety and “to economies ticking over” and was anticipating a whole lot of lobbying within the coming weeks for governments to help fertiliser producers.

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Markets Report: Market exercise and evaluation(Matt Brann)

What it means for farmers

Data from the Australia Bureau of Agricultural and Analysis Economics and Sciences (ABARES) reveals urea imports to Australia had not slowed prior to now 12 months regardless of costing about 3 times greater than common.

“This means that fertiliser provides can be ample over the 2022–23 season, though increased prices will erode farm margins,” it mentioned. 

A graph shows volume and price of urea imports.
Quantity and worth of urea imports to Australia from January 2015 to June 2022.(Supply: ABS/ABARES)

Mr Whitelaw mentioned Australian farmers have been dealing with increased fertiliser costs and sliding grain costs.

“We have had excessive fertiliser costs since July final yr and that is now more likely to prolong additional down the horizon,” he mentioned.

“That is a serious concern whenever you’ve acquired grain costs which have slid significantly because the center of Might.

“Farmers will do their calculations and if it is too costly, it is too costly.”

ABARES is forecasting Australian Premium Wheat (APW) will common $520 a tonne in 2022-23, which Mr Whitelaw and others have described as optimistic.

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