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Lower fertilizer prices prompt plant shutdown
A fertilizer market expert says farmers should keep an eye on Europe and consider locking in some fertilizer purchases now.
Josh Linville with StoneX tells Brownfield that Yara International announced they will shut down a nitrogen fertilizer production plant in Italy. “This plant by itself isn’t enormous. I think it’s about 600-thousand ton of anhydrous and 600-thousand ton of urea. Big numbers, but on the global scale, it’s not that big. The thing that we’re worried about is that this is the start of a trend.”
Linville says natural gas prices have been holding steady in Europe, but the global price for urea has been falling, prompting Yara to cut production. “So, if this plant is now starting to make that justification that we’re going to shut down, does that mean more is coming? If we shut down a second, a third, and a fourth, that does start to change the S & D (supply and demand). Now all of the sudden, we’ve got less supply and we’ve got more demand.”
Linville says this is not a crisis but is something to keep an eye on. He says prices are down significantly, so farmers should be talking to their fertilizer suppliers. “We are getting very close the the price resets that we kind of expected. Does that mean we can go lower? Sure it does, but we’re finally to the levels where we thought, hey, these are good values worth looking at so I think it’s at the very least, time to have that conversation with your supplier.”
And Linville says other low probability-high impact events could disrupt natural gas supplies and fertilizer prices in the future, such as additional conflicts with Israel and Hamas, and with Russia and Ukraine.
Tags: fertilizer, Italy, Josh Linville, natural gas, nitrogen, StoneX
Yara’s plant closure is a result of high feedstock (natural gas) pricing in addition to lower nitrogen prices in the EU market. This is common in the EU and specific to the EU market. It is a mistake to look at this as a global trend when very specific to market conditions in the EU.