Brian Henderson: Runaway fertiliser cost and what it all means

Obviously, I wouldn’t dream of claiming that the update was in any way connected with the dodgy back-of-fag packet calculations which I produced in one of these columns recently, but, as a direct result of the huge increase in fertiliser prices, the Agricultural and Horticultural Development Board (AHDB) has issued a new version of its RB209 guidance.

As we all know, rather than being a character from Star Wars, RB209 is the set of tables widely used to calculate the economic payback of fertiliser use, and, as we also know, the update being necessary as prices had risen to such an extent that they had quite literally gone ‘off the scale’ of the original tables.

Read more: Brian Henderson on Arable Matters: Is it time to hit the Tracks?

The first update, published last week, covered the three major UK crops: Wheat, barley and oilseed rape. Releasing the update, AHDB said that the price spike meant growers needed to work out their new ‘economic optimum’ – or the point at which the value of extra grain produced was not worth the cost of the extra N applied – in nutrient management plans.

To that end, the RB209 price tables had been much extended – rather frighteningly for those of a nervous disposition up to £2.50 per kg of nitrogen (or £863 per tonne of ammonium nitrate), but perhaps more optimistically, up to £350 per tonne for grain and £700 per tonne for rapeseed to, as the AHDB put it, ‘reflect current strong prices for both inputs and outputs’.

“For example, the new data indicated that at a grain price of £200 a tonne, a rise in the ammonium nitrate fertiliser price from £345 to £863 a tonne would see a reduction in N application of 70 kg/N per ha,” said the AHDB’s cereal specialist, Dr Georgina Key.

“Similarly, at a rapeseed price of £500 per tonne, the same price rise for N would see a reduction in fertiliser application of 70 kg/N per ha. The resulting changes in yield would be -0.6 tonne per ha and -0.25 tonne per ha, respectively.”

She said that significantly reduced manufacture of fertilisers, in the UK and on the continent, had led to prices of nitrogen fertilisers increasing dramatically: “Over the past few months, the price rise of fertiliser has outpaced prices for grain and as such it is absolutely essential that farmers consider adjusting nitrogen fertiliser applications in the spring to ensure they are still at an economically optimum level.”

The second part of the update, to be published in January next year, will consider further arable crops, as well as other aspects of crop nutrition management affected by price increases.

Of course, the big trouble for the grain sector is the fact that we often have to order up our fertiliser before we can get any sort of firm commitment on the likely price which grain is likely to make come harvest. While there has undoubtedly been an improvement in grain prices as the season has progressed in the UK market, there’s no guarantee this will continue up to next year’s harvest.

So, with some of the main buyers set to release their malting barley contracts this week, there will be a fair bit of number crunching going on around the country to see if it makes economic sense to put the crop in the ground this year – and if so, just how well fed it’s likely to be over the course of the growing season.

But while I’m writing this in advance of any announcement on these contracts, there should be some pressure acting on the buyers to ensure that they offer a decent price.

For, while the preoccupation with COP 26, sleaze amongst government ministers and the latest antics of the contestants in 'Strictly', have kept the papers pre-occupied in the UK, around the world there seems to be some real alarm being expressed not just in the farming papers but in the wider media about the effect which the current price hike is likely to have on food supplies and food inflation.

Rather bizarrely, a couple of weeks ago I was contacted by a Russian TV crew looking for some commentary on the effect which high fertiliser prices were likely to have on grain production in the country. Now while they might have been here primarily to cover the COP conference, the fact that fertiliser prices were on their radar shows just how big an issue the shortage of supplies is viewed on a world scale.

But with the current politicking going on between Russia, Belarus and the EU over the amassing of refugees on the Polish borders, leading the former Soviet block country’s president, Alexander Lukashenko to threaten to cut off critical gas supplies from Russia to Europe, I’m not too upset that I was tied up elsewhere on the day they called!

Of course, Russia’s decision to place quotas on the export of fertilisers form their ports, together with China’s moves to place a total ban on movements from some of their regions is unlikely to help alleviate the current price situation.

Elsewhere, though, the hike in prices – along with the closure of one of Australia’s big manufacturing plants near Brisbane, also due to familiar sounding soaring gas prices – saw the national press cover fears that farmers ‘Down-Under’ will simply use substantially less of the stuff. Although the lower yields might not yet go as far as to threaten the country’s food security, wider fears have been expressed that it could hit Australia’s balance of payments as it has been a fairly major exporter of grain when the rains have held out in recent years.

But on the subject of balance of payments, I guess our own sudden re-evaluation of fertiliser use hasn’t had the same urgency as it has for producers in Sri Lanka – where the government decided to turn the entire country over to organic production virtually overnight.

The industry along with academics, scientists and experts in the field, all warned that this was likely to have a catastrophic effect on the country’s ability to feed itself – and that it could decimate production of one of its major exports in the form of tea. Nonetheless, a ban on the importation of any inorganic fertilisers into the country was pushed through by the governing party at the start of the year, leaving producers no option but to try to track down a source of organic fertiliser.

Now, however, on top of the difficulties this has been creating for farmers producing most commodities in the country, a row over a ship-load of organic fertiliser, one of several being sourced from China, has kicked up a major diplomatic stink between the two countries.

For while the Sri Lankan authorities claimed that the organic manure contains pathogens harmful to crops such as potatoes and carrots, the Chinese company was sticking to tests conducted before the boat left China which indicated it was safe – while putting in a counter claim for a reported $8m as compensation from the Sri Lankan National Plant Quarantine Service for the loss of reputation it suffered following the controversy.

The Chinese Government also attacked the Sri Lankan media for using terms like 'toxic, garbage, pollution' and other derogatory words, claiming they 'slander the image of the Chinese enterprises and the Chinese government'.

I guess that part of this defensive attitude is due to the fact that China also exports considerable quantities of this organic manure, sourced from seaweed (amongst other sources), to both Australia and the US, where reputation is likely to be crucial.

So, as we sit down with the new RB209 tables and their updated scales to adapt or amend our cropping and nutrient plans for the coming year, it’s probably worth remembering the scale of impact which wider geo-political issues, well outside our own control, can also have on our carefully crafted calculations.