Higher natural gas and corn prices slow down
seasonal decline in international urea prices
International urea prices, which usually fall as the main fertilizer season draws to a close, have been slowed this year by a temporary rise in natural gas prices and higher corn prices. There is a fundamental market correlation between N prices and energy prices as well as maize prices.
The production of urea is very energy-intensive: around 80 % of the costs are attributable to this factor. It therefore stands to reason that if production costs increase, the demand-driven fall in prices will be noticeably slowed down by the supply side.
The recent rise in maize prices is also helping to boost fertilizer prices. This is due to the monopoly-like market influence of the fertilizer industry:
Higher market crop prices, together with the higher yield achieved through the use of N fertilizer, additionally reinforce the price-related increase in sales revenues. For fertilizer consumers, it remains profitable up to a certain point to purchase fertilizer that has become more expensive when fertilizer prices rise. The market power of the fertilizer industry is sufficient to make the product scarcer and more expensive by adjusting fertilizer supply quantities until the price pain threshold of fertilizer users is reached.
The forward prices for N fertilizer on the leading exchanges show only slight downward trends for the next two months, after which the usual seasonal increases of the second half of the year will begin again until next spring. The extremely high prices of the exceptional years 2021/22 will not be reached again, but the level remains above the long-term averages.
