Inputs

    Fertiliser prices

    The cost of manufacturing nitrogen fertiliser depends largely on the cost of natural gas.  Manufacturing of ammonia used in the production of fertiliser nearly always starts with splitting natural gas into hydrogen and carbon dioxide.  The hydrogen is then combined with nitrogen (from the air)  under intense temperature and pressure to produce ammonia (The Haber Process).  In most occasions, the energy for this is also supplied by gas.

    In addition, the price of fertiliser is also a function of supply and demand. However, there is often very little scope to massively increase supply in the short term although  analysis of the International Fertiliser Manufactures statistics show small increases in manufacture when fertiliser prices are high.  

    The price of wheat is a good determinant of fertiliser demand and not surprisingly when the price of wheat increases so too does the price of fertiliser.

    Graph 7 – Nitrogen Fertiliser and wheat price relative to the average for 2001

    All the prices in the graph are in sterling and shown relative to the average for 2001.  The gas prices in the graph are US prices which are currently below those elsewhere in the world giving an under stated picture of manufacturing cost. 

    Key Point

    • Fertiliser price is determined both by the cost of manufacture but also by demand. Level of demand is indicated by the relative wheat price.
     
     

    Key contacts

    Andrew Wraith

    Andrew Wraith

    Director
    Food & Farming

    Savills Lincoln

    +44 (0) 1522 508 973

    +44 (0) 1522 508 973

     

    Steve Hollis

    Steve Hollis

    Director
    Food & Farming

    Savills Salisbury

    +44 (0) 1722 426 853

    +44 (0) 1722 426 853

     

    Keith Preston

    Keith Preston

    Director
    Food & Farming

    Savills Oxford

    +44 (0) 1865 269 170

    +44 (0) 1865 269 170

     

    Ashley Lilley

    Ashley Lilley

    Director
    Food & Farming

    Savills Cheltenham

    +44 (0) 1242 548 012

    +44 (0) 1242 548 012

     

    Giles Hanglin

    Giles Hanglin

    Director
    Rural Research

    Savills Margaret Street

    +44 (0) 207 016 3786

    +44 (0) 207 016 3786