The traditional explanation that global fertiliser prices are linked to energy costs, no longer stands up to scrutiny. We know oil and gas prices have dropped over the past year, but that hasn’t been reflected in fertiliser bills.
This is a big issue, as fertiliser is second only to feed as the biggest bill on most farms. Given the cash flow position of farming, all bills are being questioned more than when times were better.
Another traditional claim was that fertiliser prices reflected supply and demand and the global state of agricultural markets – a polite way of saying the big companies that rule global fertiliser markets charged as much as the market would bear. That also does not now stand up to scrutiny, since farming is in a bad way due to poor commodity prices, but fertiliser prices remain high. From a UK perspective, until recently, sterling was strong against the euro and even the US dollar, in which fertiliser is traded, but again that was not reflected in prices.
This seems to be a case for farmers of ‘heads I win and tails you lose’. Logic seems to have gone out of the pricing equation, and there’s disappointment that the farm commissioner, Phil Hogan, has failed to tackle this problem. Just after he went to the top job in European agriculture he queried, in a speech to the Irish Farmers Association (IFA) in Dublin, why fertiliser prices were seemingly disconnected from the energy market. He hinted at an investigation by the EU’s competition commissioner, but nothing’s happened beyond a few emails between them.
To be fair to the Commission this isn’t an easy issue. It is lobbied intensely by those representing fertiliser manufacturers, and a past investigation failed to find any evidence that companies worked together to manipulate the market. But that doesn’t mean that with control in the fertiliser industry now in even fewer hands there’s not a case to investigate again whether the market is operating properly and fairly.
The IFA, which irst pressed Mr Hogan to take action, believes he’s let it down. It’s sought to establish its own case that the market isn’t working properly, commissioning the International Food Policy Research Institute in the United States to undertake a study into the fertiliser market.
The study claims lower fertiliser prices across the EU would improve farm profitability and create up to 17,000 jobs in rural areas by making agriculture and food more competitive. It questions why European prices have risen while they’ve fallen elsewhere, and while this is a snapshot of prices at a point in time, the arguments seem sound.
The central and most damaging claim for the Commission to address, is that the duties it imposes on the import of fertilisers protect global companies at the expense of farmers. These are referred to as anti-dumping duties, to protect European manufacturers, but given where prices are for farmers, there’s scant evidence that large, globally vertically integrated businesses need the protection the European Commission gives them.
The report makes the points that farmers have been making for a long time: for years they were told fertiliser prices are high because they’re linked to the price of oil and gas, the biggest cost in their manufacture, but when those prices fell and fell again, fertiliser prices stayed high.
Farmers were also told prices reflected a buoyant agricultural commodity market. That’s not the case now, but it’s not dented fertiliser prices. This all adds to farmers’ frustration when they have to spend money they don’t have to buy something that’s over-priced, because without it they won’t have a farming business.