Despite international gas prices falling by about 27% on the equivalent price a year ago, nitrogenous fertilisers continue to hold their value. Gas accounts for 60% of ammonia's production cost, but AN (ammonium nitrate) and urea values remain firm.
While spot crop and milk farm-gate prices are down year-on-year, the average domestic price for AN is currently close on £270/tonne for main brand products, about £10 up on mid-season last year. Urea prices have also firmed to around £280 and are rising as spot demand for it is currently greater than global supply.
Nitrogen is important to agriculture, as without it the machinery of photosynthesis cannot function - no protein can form, and no plant can grow. Corn, wheat and rice, the fast-growing crops on which humanity depends for survival, are among the most nitrogen-hungry of all and demand more than soil in its natural state alone can provide.
Fortunately, man has developed industrial processes that capture atmospheric nitrogen and force it into a chemical union with the hydrogen in natural gas, creating the nitrogen fertiliser modern crop varieties crave.
That nitrogen fuels bountiful harvests, without which, human civilisation in its current form could not exist. Our planet's soil simply could not grow enough food to provide the burgeoning world's population with its accustomed diet. In fact, almost half of the nitrogen found in our bodies' muscle and organ tissue started out in a fertiliser factory.
A wide range of global factors affect the price of fertiliser, but most relate to supply and demand. Demand is strongly influenced by produce prices which causes planted areas and application rates to increase or decrease. Demand for food production continues to grow on the back of global population growth and changes in diet.
Supply can be affected by production capacity (which is around 160m tonnes globally) and availability of energy for production. China produces about 34% of the world's nitrogenous fertiliser, the EU about 10% and India 9%. As most urea in China is produced using coal - anthracite in particular - nitrogen prices are also affected by movements in coal prices. Commodity speculators also influence world markets.
Fertilisers are traded globally and the UK accounts for just 1% of global demand. The UK has limited fertiliser manufacturing capacity of about 1.4m tonnes, which is a long way short of the total UK market of just over 4.1m tonnes. The UK imports over 2m tonnes of nitrogen products each year, plus a further 1m tonnes of other raw materials used for blending compound fertilisers.
Bigger players like the Far East account for close on 60% of world consumption and have a massive influence on international markets.
China for instance applies varying export taxes on its massive production to discourage cheap exports and keep prices low for its farmers - a subsidy for Chinese food production.
India on the other hand, doesn't have the same manufacturing capacity as China with its massive coal and gas reserves, and as a result subsidises its domestic fertiliser industry to the tune of $12.2bn (£8bn), of which the annual budget for nitrogen in the current year is set at $8.1bn (£5.33bn). To put that in perspective, India's growing military capacity has an annual budget of $38.4bn (£25.26bn).
Unfortunately, farmers don't use cheap, subsidised fertilisers efficiently, and that has a hidden environmental cost. Run-off nitrogen is suffocating wildlife in lakes and estuaries, contaminating groundwater, and even warming the globe's climate. As a hungry world looks ahead to billions more mouths needing nitrogen-rich protein, how much clean water and air will survive our demand for fertile fields?
Becoming more efficient in the application of nitrogen fertilisers on farms and avoiding nitrogen losses also has direct financial benefits for farmers, and reduces nitrous oxide emissions and nitrate runoff into waterways.
Nitrogen-based fertilisers and livestock waste (urine and dung) are the key sources of nitrous emissions on farms.
Nitrous oxide, more commonly known as laughing gas, is no laughing matter. It is an extremely potent greenhouse gas (about 310 times that of carbon dioxide) that remains in the atmosphere for over 100 years.
Research has estimated that between 40% and 60% of nitrogen inputs into cropping and grazing systems, respectively, is lost to the environment and never completes the cycle into agricultural product.
The high cost of fertilisers in Europe has forced Scottish farmers to be more efficient in their use, but most would like to see prices easing in line with energy costs.
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