Natural gas price trigger fertilizer production cuts
A market expert says the new spike in nitrogen prices is because of the natural gas supply issues in eastern Europe. Josh Linville with Stone X says Russia has been cutting supplies and gas prices have been rising. “Prior to the Russian invasion of Ukraine when all of those prices went nuts last year, their typical price was in the single digits. This week, we saw that price go over $80 in MMBTU equivalent.”
And with the high natural gas prices, Linville says fertilizer producers have reached the breaking point. “We’ve seen price spikes before but we haven’t seen plant closure announcements with it. This week has been different. Now all of the sudden, we see multiple plants in Poland starting to announce that because of the high price of natural gas, we have to shut down. We can no longer continue to produce fertilizer at a major loss like we’re doing right now.”
Linville says the natural gas is used to produce anhydrous, which is then often used to make upgraded products like urea, UAN, and nitrate.
Linville says regardless of where the market goes, farmers can manage risk by buying fertilizer and selling corn together. “When we look at buying that fertilizer, I’m a big advocate for selling that grain. Sell that December 2023 corn with it. If you sell corn, buy the fertilizer. I’m a very big advocate for doing both. That’s the best way I see to help alleviate some of these price risks that we’re seeing today.”
He tells Brownfield the market has already moved, so there’s little else farmers can do unless their supplier still has some product available at lower prices.