Commodities Update (7th October)

Well, what a month it’s been since my last commodities report!  As I write this (07/10) the pound has dropped about two and a half cents against the dollar in the last month, and has risen overall about a cent against the euro, after initially falling until about the end of September where it began to rise again.

Oil Prices have continued to rise, with a maximum rise of $10/barrel over the last month, but over the last couple of days has eased back $1/barrel, but oil is still over $80/barrel.

Gas prices reached record prices yesterday, raising another 37% in just one day, but have come back over 30% this morning on the news that Russia will supply more gas if the UK/EU approve a new pipeline from Russia.

Since my last report there have been three GDT results with one of +4.0%, the next +1.0% and this week +0.0%, with all categories offered seeing an increase except whole milk powder, during this latest auction.

Milk Powder
Skimmed milk powder (SMP) products have continued to rise on the back of rising SMP prices on the global market.  We need to be aware that palm & coconut oils are continuing to rise and appear close to historical highs and so put further pressure on milk powder price rises.  At current prices even a milk powder at the cheaper end of the market is costing 25/26p/litre just for the powder, and so people may be tempted to consider feeding whole milk again to calves but consider the health status of your herd before you do as the last thing you want to do is risk spreading Johne’s etc. through your calves.  Especially with multiple milk contracts now stating/expecting a reduction in Johnes cases in the herd.

Cereals have risen approximately $10/t in the last month, Soya has fallen nearly £10/t in the last month with positive news coming from North America from its soya harvest, with all eyes now on the South American harvest when it begins.  Rape has jumped further at £15/t with tight supply and strong demand for vegetable oil.  Looking forward there are concerns over supplies of some feeds for next year on the back of fertiliser prices potentially lowering planting.

Well, what an interesting month this has been!  Just read my comments from last month that CF had just withdrawn prices again, and they haven’t come back into the market as gas prices have continued to rise.  Even after the falls today there is still a net increase in price over the last 36 hours.

Due to the volatility of the market, prices have sometimes been changing more frequently than daily, with currently some supplier still out the market after the big rise, and now fall, in the last 36 hours.

Therefore, as it stands today there is a very limited supply of nitrogen in the market.  There is/was a very limited supply of imported AN in the market, but this was greater than £500/t for the last prices available.  There was a limited supply of imported 27N 12SO3 available but that was only just under £500/t and there was some urea at just over £600/t, however I’ve just been told today that current world price for this is closer to £700/t, if you can get hold of it!

CF are not producing product because of the rising gas prices, in Europe they are cutting production down due to gas price, and looking to supply domestic market only, so limited imported product available and urea is having its production potentially curtailed again because of energy costs.  I read on Monday that China was planning to limit the availability of power to factories etc. due to the cost of gas, and so therefore the opportunities to produce urea will be cut, with the Indian tender still to be fulfilled and now strong demand from South America.

Over the last month P & K prices have continued to firm as well with DAP close to £600/t and MOP close to £500/t.  Phosphate prices are expected to continue firming as China, which produces 30% of the world’s phosphate is expected to cut exports.

For the last couple of months, I’ve been mentioning driver/lorry availability as a key issue for spring delivery of fertilisers, now the key issue is availability itself of product, particularly Nitrogen, with some of the importers not willing to take the risk of buying products on the world market for urea at this price.

Just a thought on reflection for everyone, we had a buying group meeting Monday night and at that point both urea & AN had risen about £150/t in the previous two weeks.  A member came back to me later that night with the following information to some number crunching they had done.

For a farm producing 6000 litres, keeping 2.5cow/ha, and using 200kgN/ha the £150/t increase, when using AN, has cost that farm nearly an extra 0.6ppl in their cost of production through no fault of the farm’s.  Where is that cost now with prices having risen even further?

If you’d like to discuss your milk powder, feed & fertiliser requirements, then please call FAR registered Dairy Nutritionist & CowSignals® Master Andrew Jones on 07717 44288 or email