TL;DR: Rising beef prices counteract high fertiliser costs, restoring balance amidst fluctuating market conditions. Farmers remain cautious with fertiliser usage due to sustained high input costs.
Long-Term Trends
Over the past five years, there has been a noticeable increase in fertiliser prices. This rise was particularly sharp from mid-2021 due to the European energy crisis, with further spikes following the onset of war in Ukraine. By March, domestic AN fertiliser prices had stabilised at £339 per tonne, maintaining a higher level than before 2021.
Beef Prices on the Rise
Conversely, beef prices have surged since 2020. This rise was driven by a reduced supply amidst steady demand. By March 2024, the average price for all prime deadweight beef reached 491.6 pence per kilogram, marking a near 50% increase from 2020.
Comparative Value
Relationship Changes
The cost of beef relative to fertiliser can be demonstrated by the amount of beef required to purchase a tonne of AN fertiliser. Despite a decline throughout 2023, fertiliser prices are still above the historical average. Beef prices have somewhat offset this, thanks to their robust increase.
Significant Shifts
Historically, buying one tonne of AN fertiliser in 2018-2019 required 73 kg of beef. By 2022, this amount had jumped to 178 kg, making fertiliser prohibitively expensive for many, based on traditional usage levels. According to a British Survey by Defra, the average nitrogen application on grassland dropped to 80 kg per hectare in 2022, a decrease of 12kg from previous years.
Outlook for Producers
The recent fall in fertiliser costs coupled with strong beef prices has begun to restore the price ratio to levels seen before 2021. However, with beef prices at near-record highs and ongoing high input costs, farmers may remain cautious about increasing fertiliser usage.
Strategic Considerations
Producers must now weigh the benefits of fertiliser applications more carefully, considering market prices and weather conditions to optimise use and cost-efficiency.
The interplay between falling fertiliser costs and rising beef prices has brought some stability back to the industry. Yet, the reliance on high beef prices to counteract elevated input costs suggests a cautious approach will continue among farmers as they adapt their strategies in response to market conditions.
