Thursday, 18 May 2023
Senior Analyst – cereals & oilseeds
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Spot prices for UK produced Ammonium Nitrate (AN) averaged £439/t in April, down 5% from March, according to latest AHDB data. This is a much smaller price fall than the 26% fall between February and March.
For several months now, fertiliser prices have followed the downward move in natural gas prices, which continue to fall.
Nearby UK natural gas futures prices are now around 73 pence per therm. This is down from last month and a long way down from the peak last August. But, natural gas prices are still above the levels from two years ago, when they were around 50-60 pence per therm.
Warmer weather across Europe is reducing demand for natural gas for heating, which could help reduce prices further in the short term. Plus, natural gas stores are fuller than average for the time of year across Europe (Gas Infrastructure Europe).
But there’s an increasing number of reports questioning if natural gas prices could start to rise again in the months ahead. These are some of the reasons:
Against this, currently US stocks of natural gas are high after a mild winter. These will cushion any smaller increases in demand or falls in production.
Also, Asia is a big competitor for LNG supplies. Like here and in the US, demand is influenced by adverse weather, either hotter or colder than average, and economic growth. El Niño weather events can bring extreme weather to parts of the US and Asia and an EL Niño is forecast to develop later this year. Meanwhile, economic growth in China is currently unclear. But, either stronger economic growth in China or adverse weather, would mean higher competition for the LNG we now rely on.
In terms of what this means for fertiliser prices, it is likely that AN prices will continue to track the most recent downward movements in natural gas markets in the short term. However, with volatility likely to remain in natural gas markets, with the potential for increased global demand for LNG, this will likely have an impact on fertiliser prices going forward.
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Senior Analyst – cereals & oilseeds
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