Where next for fertiliser prices?

[AHDB Cereals and Oilseeds]

Looking back over the past 17 years, there is a strong correlation between value of Chicago maize futures (nearby, in sterling) and the value of UK produced ammonia nitrate. This is not overly surprising if we use maize prices as a proxy for the supply and demand situation globally.

High prices prompt increased interest in planting, which in turn prompts increased demand for fertiliser, supporting fertiliser prices.

The relationship is not perfect, and we have to accept that there will always be other drivers that make forecasting futures direction a challenge. In 2008 we saw such a situation, where external drivers i.e. a global energy boom, pushing fertiliser prices up against the trend. However, if we assume the trend holds this year it is entirely plausible that, given the strength in maize prices, we could see ammonia nitrate values push back up to, and potentially beyond, £300/t.

https://ahdb.org.uk/news/where-next-for-fertiliser-prices-analyst-insight

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[An Gof]

are AHDB trying to talk the job up for CF
I can promise you that they need no encouragement.

 

[AHDB Cereals and Oilseeds]

are AHDB trying to talk the job up for CF
I can promise you that they need no encouragement.

Certainly not talking it up, maize prices have backed off so far this week. But, highlighting the potential for higher costs with a -£33/t carry from May-21 to Nov-21 in wheat prices.

James

 

[Brisel]

Certainly not talking it up, maize prices have backed off so far this week. But, highlighting the potential for higher costs with a -£33/t carry from May-21 to Nov-21 in wheat prices.

James

So, where do you see new season AN starting if that's your basis? If you extrapolate the graph backwards you'd be able to model it! I agree that UK fertiliser tracks the wheat price far better than Natural Gas.

PM if you'd rather not post in your current position!

 

[Bax]

Nothing cures high prices like high prices.

 

[Highland Mule]

Spurious Correlations

Correlation is not causation: thousands of charts of real data showing actual correlations between ridiculous variables.

www.tylervigen.com

Correlation does not mean causation, and your correlation is not that strong anyway.

 

[Brisel]

Nothing cures high prices like high prices.

That applies with grain prices. There’s usually a big lag before fertiliser prices drop.

 

[Bax]

That applies with grain prices. There’s usually a big lag before fertiliser prices drop.

Yes that's normally the case. Urea prices will probably come off a bit late season, let's hope it doesn't get banned.

 

[AHDB Cereals and Oilseeds]

Spurious Correlations

Correlation is not causation: thousands of charts of real data showing actual correlations between ridiculous variables.

www.tylervigen.com

Correlation does not mean causation, and your correlation is not that strong anyway.

Completely agree that correlation isn't causation, especially here. There are of course other factors which need to be considered.

In this instance the chosen line of best fit has an R2 of 0.74, again I appreciate this isn't perfect and there will be other variables at play - In this instance there is a stronger statistical relationship between grain prices and ammonia nitrate than the often stated relationship between natural gas and ammonia nitrate.

James