Market Morsel: The gas price could bite your fertilizer bill.

Credit TEM

At TEM, we keep a very close eye on the markets associated with agriculture. One of the major markets is natural gas.

We keep a close eye on it because of its relationship with nitrogen fertilizer pricing. The first chart below shows the relationship between urea and natural gas. At its simplest, natural gas is the main input for production. If the price rises, then the cost of producing fertilizer increases.

In the past week, natural gas prices in Europe hit record highs (see the second chart). This is a huge concern not only for producers but also for fertilizer manufacturers.

Due to the high input price, fertilizer manufacturers are curtailing production across the European bloc. Our friends at CRU Group have assessed the market and have output reduced by the following:

• Ammonia 50%
• Urea 40%
• Nitrates 34%
• UAN 30%

It’s going to be harsh winter in Europe as these energy prices start to bite. That reliance over the past decade on Russia is going to bite.