In May-June, Ukrainian farmers significantly increased the purchase of fertilizers - the demand for nitrogen fertilizers in the low season unexpectedly increased by 15-20%.

This is stated in the message of the Ostchem company.

"In May and June, we saw an uncharacteristic growth in demand for the low season — about 15-20% higher than usual for this period. Moreover, not only small and medium-sized farmers, but also large players are actively contracting for the fall," Yevhen Khurylenko, head of Ostchem RETAiL, said in a comment to the Interfax-Ukraine news agency.

In his opinion, such an atypical surge in demand is associated with a number of factors, including the rise in grain prices and the emergence of additional resources for the purchase of fertilizers by farmers, a decrease in the prices of basic fertilizers, the disruption of the logistics chains of importers, as well as the situation in the Ukrainian electric power industry.

"The key factor is a sharp rise in grain prices and, accordingly, an increase in farmers' income. Only in the last month, the price of grain has risen by 25%, which has allowed many farmers to get additional funds for the purchase of fertilizers, PMM and PPE. About 30% of our fertilizer deals are grain exchange programs. The second factor that provoked the intensification of demand is the seasonal decrease in selling prices for nitrogen fertilizers, which is connected with acceptable gas prices in May," Khurylenko said.

A representative of Ostchem RETAiL clarified that about half of the company's sales are ammonium nitrate, another 50% are KAS and urea (in the ratio of 60% to 40%).

Khurylenko emphasized that in June the demand for nitrogen fertilizers continued to grow due to the emergence of new factors that "activate the market and change the supply structure."

"The logistics chains of major fertilizer importers have broken down. We know that contracts have been broken as many drivers refused to go on international flights because of the risks of being mobilized at customs. We also see how the Poles have again started to block the roads to the EU. Fertilizer imports have become less reliable and more expensive," Khurylenko summarized.

The representative of Ostchem RETAiL emphasized that in the future, the situation in the Ukrainian energy sector and the dynamics of energy prices will be a new determining factor that will significantly influence the fertilizer market.

"Electricity takes up 10% of the cost of fertilizers, gas - about 70%. The two-fold increase in electricity prices in Ukraine and the renewed increase in gas prices in the EU have already formed quite clear expectations among farmers regarding the cost of fertilizers for the next season. Farmers understand that a drop in prices for nitrogen fertilizers is unlikely in the near future. In addition, the risks of blackouts are added. Everyone understands that summer will be difficult, winter will be even more difficult. Trying to insure themselves against the instability of markets, farmers are already making prepayments, purchasing fertilizers in advance and forming warehouse stocks. The only thing holding back the fertilizer market from significant growth is the fact that farmers are still severely limited in working capital," Khurylenko added.

Plants of the Ostchem nitrogen holding produced 520.6 thousand tons of mineral fertilizers in the 1st quarter of 2024. At the same time, the import of fertilizers significantly exceeded domestic production.

Source: agroportal.ua