Nitrogen fertiliser prices are on the up, with a July spot price of £353 per tonne for UK ammonium nitrate (AN, 34.5% N) for delivery – up £9/t from June. Granular urea rose £46/t over the same period to £397/t.

According to AHDB, this is due to natural gas prices rising in June as temperatures climbed (increasing the need for air conditioning) at the same time as there were supply outages in Norway.

There was a further increase last week due to a potential strike at the Liquified Natural Gas (LNG) plants in Australia. Europe now needs to compete for LNG cargoes to compensate for lower Russian gas imports.

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UK natural gas prices have eased back slightly since, however, they are still trading close to 90pence per therm, which although up, is a long way down from last year’s peaks but above the recent lows of late May and early June.

The EU Commission re-introducing tariffs on imports of urea and ammonia from several origins in June, has also affected prices. The tariffs were suspended in December after prices spiked in 2022.

Higher gas prices, along with the re-introduction of tariffs, a weaker pound against the US dollar, and lower Egyptian urea output, have filtered through to push up UK nitrogen fertiliser prices.

Looking forward, natural gas prices are higher than current levels, partly as autumn and winter mean higher demand. European natural gas stores are filling up too, but the region’s dependence on LNG will continue and gas prices remain vulnerable to further supply shocks.

Natural gas makes up around 60-80% of nitrogen fertiliser production costs in Europe, hence any rise in natural gas prices is likely to filter through to UK nitrogen fertiliser prices.

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Another factor to watch is the sterling to US dollar exchange rate, with a weaker pound against the US dollar making all imported products dearer, including nitrogen fertiliser.

Meanwhile, potash and phosphate fertiliser prices continued to fall in July. The average spot price for Muriate of Potash (MOP) fell £15/t to £416/t, the lowest price since Aug-21. The average spot price for Diammonium Phosphate (DAP) fell £40/t to £519/t, the lowest price since May-21.

Whether this trend continues into August or changes depends on global prices for potash and phosphate, plus the sterling to US dollar exchange rate. Global DAP prices have been picking up in recent weeks. If sustained, and sterling remains weaker against the US dollar, this could translate into higher UK prices going forward, AHDB said.