Latest / Hydroponics Daily / Fertiliser Time Bomb: gas, geopolitics & carbon taxes threatening 2027 Prices

Transcript

Fertiliser Time Bomb: gas, geopolitics & carbon taxes threatening 2027 Prices · Hydroponics Daily

0:00
Hello there, and welcome back to the podcast. I'm your host, Dr.
0:04
Russell Sharp, and this podcast is going to go out across all three of Eutremus podcasts.
0:10
That's Grass Me Up for Sports Turf and Lawn Care, Serial Killers for Arable
0:15
Crops, and Hydroponics Daily for Hydroponics Growers.
0:20
And the reason why, again, we're going to do a podcast for all three of those
0:24
is because we're talking about a subject that's probably applicable to all three.
0:29
And I'm going to sort of rank and explain the threats to fertilizer and pesticide
0:35
prices in 2027 and beyond in the UK, because there is a number of threats on the horizon.
0:43
So I want you to be aware of then the price of fertilizer that might skyrocket.
0:48
Now, obviously, the first one we're all aware of is the cost of natural gas
0:54
and geopolitical conflicts in Iran and Ukraine.
0:58
Gas prices have increased dramatically oil prices have increased,
1:02
and this has an impact on the price of fertilizer it takes a lot of energy to
1:08
produce nitrogen in the harbour bosch process so they those prices of nitrogen which is the main.
1:15
Element in fertilizers is going to be proportional to that however that's not
1:22
the only impact you've got supply issues as well and stockpiling as people stockpile.
1:28
That increases the price in the short term and then reduces it in the long term.
1:33
You've also got supply of sulfur. Sulfur is a by-product of petrol production,
1:39
desulfurization. They could take it out to make them burn cleaner.
1:44
And that's where the sulfur for fertilizer comes. And there's a massive shortage
1:47
of that at the moment. So sulfur prices might increase.
1:51
Now, that's probably the main threat, really, to fertiliser prices,
1:57
could increase dramatically.
1:59
Now, if Donald Trump...
2:03
Does what he said he's going to do and solves the war in Ukraine on his first
2:06
day in office. Oh no, that didn't happen, did it?
2:08
If he solves the war in Ukraine and that's a solution, then that's great.
2:15
And if Iran de-escalates and we get trouble-free trade through the Strait of
2:20
Hamus, then that potentially could have actually reduced fertilizer prices in 2027.
2:27
It's not just the petrol though as i said sulfur is a major issue.
2:32
Phosphates a lot of phosphates come out of russia and that trade has been restricted,
2:37
i would imagine a lot of people have found backdoors and ways of getting in
2:40
phosphates though from russia because trading with say serbia and then buying
2:45
off serbia and things like this countries that are allowed to trade with russia
2:49
and then countries that we are then allowed to trade with
2:52
so we can trade with serbia and serbia can trade with russia and things like that.
2:57
It's the sort of thing that happened in the Gulf War as well.
2:59
Other things, a lot of humates, humic acids come out of Eastern Europe and Russia
3:03
and Belarus and places like that. So it's not just nitrogen and the big fertilizers that are an issue.
3:09
And obviously, pesticides will increase in cost because they are energy intensive
3:15
to produce as well. So your weed killers, your insecticides, your fungicides.
3:21
However, because they're already a high price, the relative impact will be less
3:26
so fertilizers especially agricultural crop for,
3:30
arable crops and grasslands they're going to be really cheap and so a increase
3:35
in the cost of fuel dramatically impacts the cost of those at the farm gate however,
3:42
a the the increase in fuel cost for production for a pesticide which is already
3:47
very high because most of that
3:49
cost is due is profit for the company that they can then invest in R&D.
3:55
That's why you know syngenta make a product that controls leather jackets and
4:00
that's like one thousand two thousand pounds a litre and you can guarantee that's
4:05
not oil prices that guarantees that it's two thousand pounds a litre it's two
4:08
thousand pounds a litre because,
4:10
because of the the intellectual property they can they can they can charge that
4:15
to in this case sports turf and growers it's like that i don't know what it
4:20
is now but at one time it was very high, £1,000, £2,000 a litre.
4:24
There is the second biggest threat is much more certain and probably just as
4:33
big, but it's very certain what's going to happen with this one.
4:36
And that is the UK carbon border adjustment mechanism.
4:40
And this is a major impact. This has already happened in Europe.
4:45
Shout out to Tom Cundiff, who has made me aware of this one.
4:49
I wasn't aware of this one, but this is this is going to be a massive one and,
4:53
basically it is adjustments for,
4:57
to make sure that anything that's produced abroad with really high carbon,
5:02
carbon dioxide production levels they have the same sort of,
5:07
tax and burden as if you were to produce them in the uk so europe had its own
5:13
carbon border adjustment mechanism,
5:15
it was implemented in january this year and the imports plummeted 25 percent,
5:23
i'm not sure what effect that had on the price of fertilizers but certainly
5:26
the amount imported dramatically reduced,
5:30
and so the uk are inducing this this tax will steadily increase the cost of
5:35
high carbon imports especially fertilizers pushing up the baseline fertilizers
5:41
so again this is going to be more,
5:44
this is impact going to be felt more.
5:47
Arable with arable farmers because they're low cost to begin with bulk fertilizers,
5:54
could be massive on the effects but the impact that's going to have on,
5:58
crop prices and food prices is going to be massive and i don't think the government
6:03
probably realized that and with other increases in you know inflation on food
6:07
prices that is something that they're not going to.
6:11
Think it's going to be a shock to the system and bizarrely They've also...
6:16
Because of food prices are going high they've also reduced tariffs,
6:21
on fertilizers so at one point they've put basically a tariff on carbon and
6:26
then they're taking off a tariff temporarily on fertilizer imports it's like,
6:33
all parts of the government don't know what they're doing so that this reduction
6:36
in tariffs that's occurring next year apparently that's temporary.
6:43
And that will sort of offset this carbon mechanism thing this CBAM,
6:48
and then eventually the price will just rise dramatically so that's something
6:51
to watch out for it'll probably be in the news as we get into January and things
6:56
like the National Farmers Union will be going on but combine that with imagine imagine if,
7:02
rather than de-escalation you've got escalation of the Iran the European Conference conflict.
7:07
Imagine, you know, Israel was to further, you know, cause trouble in other countries, not just Iran.
7:15
Imagine Russia was to invade parts of Eastern Europe, which they've sort of,
7:20
you know, built up troops and things like this.
7:22
Then to combine that with carbon adjustment mechanism and the price of fertilizer
7:26
could dramatically increase.
7:28
We talked about their phosphate supply in Russia.
7:30
Global phosphate market is heavily concentrated with morocco holding approximately
7:35
70 percent of known reserves very very commonly quoted fact,
7:40
it's but the problem there is it's mined in the disputed territory of western
7:45
sahara officially technically according to the united nations i think western
7:49
sahara is still owned by spain it didn't really do very well in,
7:54
ceding that territory decolonizing it and so there was a messy breakup and now
7:59
Morocco claim it also the separatists there and so,
8:05
supply could be very very linked to you know.
8:10
Islamic fundamentalism in that area building up and things like this so something
8:13
to watch out for however you know people have vested interest in that,
8:19
fertilizer prices the next one we're going to go into is crop yields and commodity
8:22
prices fertilizer prices are commonly tied to farm profitability when crop prices
8:28
rise fertilizer manufacturers often increase their prices in response,
8:33
to confident farmer demand.
8:35
However 2025 and 2026 grain prices were low but in the UK yields were low as
8:42
well so mean higher input costs severely squeezed farm margins.
8:47
So global fertiliser shortages higher prices could force farmers to skip applications,
8:53
that could further impact yield and drive up food prices and that paradoxically
8:59
gives suppliers more room to increase their prices.
9:02
So it's a bit of a positive feedback loop there.
9:05
Next up, number five, I'd say more for the horticulture, sports turf, lawn care sector.
9:16
The UK Labour government have decided that they're going to sanction companies
9:21
operating in the occupied territories of Israel, Palestine,
9:27
and ICL are operating in the Dead Sea Works in the occupied territories.
9:34
And by definition, then they should be sanctioned by the UK government.
9:39
If they do that then icl then probably one of the largest suppliers of fertilizer
9:45
for the horticulture sector and especially sports turf in uk and ireland,
9:49
could be sanctioned and stop production in which case supply would be limited
9:54
and you'd have to go to other companies that supply them such as ourselves origin and.
10:00
Plenty of others especially ireland ireland is massive on icl products especially
10:06
gaa so you think about all those gaelic,
10:09
you know republican you know hating the english sort of sports they all promote
10:15
icl's products and then yet you've got the likes of bohemians wearing,
10:20
palestinian shirts you've got the irish national team in football doing you
10:26
know bowing their heads and things like when the israeli national anthem and
10:30
protests and things like that,
10:33
and threats of action.
10:35
Sporting, what's the word, sporting boycotts against Israel.
10:40
And all in Ireland, massive, you know, pro-Palestinian action is massive in
10:45
Ireland. And yet they seem to forget that all their stadiums,
10:49
all their GAA stadiums, all their golf courses are being supplied by ICL.
10:54
However, there's no, I don't think they sanction Israel because Ireland is,
10:59
in inverted commas, politically neutral.
11:02
And whereas the uk we are threatening that so that could be a massive one icl
11:07
could in theory not be produced but do i believe that the uk government will
11:12
get around to sanctioning.
11:15
Israeli companies operating in the occupied territories no i don't i think the
11:20
uk government will threaten it and i think they're too busy doing other things
11:24
like raising taxes to be bothered to to do that so that's that,
11:30
number six this is a massive one for horticulture,
11:35
hydroponics but mass probably biggest on hydroponics and that is regulatory
11:39
harmonization which means that everyone,
11:42
great eyes glaze over and stop listening but it's actually massive it could
11:46
destroy the hydroponic industry as we know it and could have a massive impact
11:50
on horticulture especially sports turf,
11:54
and a medium effect on arable crops and that means that the eu implemented strict
12:00
new biostimulant regulations in 2026 they already had stricter fertilizer labeling and registration,
12:08
requirements for every member states pretty much apart from ireland and the uk and then the uk left,
12:14
As of late 2026, the UK government doesn't have these requirements,
12:20
but there's ongoing proposals to harmonise.
12:22
And all the NGOs and companies and consultancies, things like this,
12:29
are going to be pushing really hard for this.
12:31
The large agrochemical companies are going to be pushing hard for this because
12:34
it's a barrier to entry. It's money to be made for consultancies.
12:38
And what's going to happen is that all the small companies producing 50.
12:43
Different types of fertilizer and biostimulants they're all go out the window
12:47
they will go to the drain because they can't afford 80 000 pounds to register every single product,
12:54
and utrema we will probably lose half of our portfolio if these registrations
12:59
go through because i am not paying 80 000 pounds to register,
13:03
one of our least selling products try to think of one,
13:06
probably won't name them for commercial reasons but yes we you,
13:09
know horticultural dechlorinator for example we don't sell a massive amount
13:14
of we would just ditch that because um,
13:17
we're not spending i'm not spending 80 000 pounds of my hard-earned money to
13:20
register that and if i was a hydroponic seller of a niche range and i had you
13:25
know three different types of pk products and a boost and all this then you
13:29
just get rid of them you'd have to get rid of them all
13:32
and so this would destroy,
13:34
the hydroponic industry apart from the main players who would get even more
13:39
dominance you know in sports turf you'd lose all those biostimulant companies
13:43
selling niche sort of products,
13:46
and in agriculture you would probably the sort of products you see at groundswell,
13:51
up-and-coming companies are.
13:53
Your niche products you would just be relying on yara and and people like that
13:59
and and bog standard big fertilizers and and there would be one or two biostimulants,
14:04
so that would be a massive impact so it wouldn't impact,
14:07
farmers so much that one but you know it would be of all the six that would
14:12
be the the bomb for sort of companies like you tremer who are,
14:17
up and coming fertilizer companies and biostimulant companies trying to make
14:20
a name for themselves with novel and interesting products,
14:23
it sort of feeds its way into sort of,
14:27
you would have to get funding to launch companies and you would have to go to
14:32
the city of london to launch a product which is silly because you know we look
14:36
the beauty of the uk system is that we can,
14:39
develop a product in our laboratory we can test it in a field and we can check
14:44
if it's if it works and grows grass or.
14:47
You know carrots better than than anything else and then we can launch it and
14:50
see if the industry wants it you know you can do something in the lab check it works,
14:54
and and you might say well we need you know to raise two million pounds in funding
14:58
but if you do that then you've got all these investors and then you launch it
15:02
and it's a dud then you've wasted,
15:05
you know seven years registering it two million pounds in startup funding venture
15:11
funding and without that just because you need registration,
15:15
so i think it's a silly thing i think we've got a better system in the uk and
15:19
we're trying to adopt eu rules on fertilizer and food just so we can be friends
15:23
with them again and they'll start buying our stuff and i don't think we need to you know,
15:29
switzerland and norway don't so why do we have to bend over backwards when we're a big country,
15:34
anyway that's enough of a rant for me if you think differently let me know i
15:38
if you disagree with anything on this topic then uh more than happy to debate
15:43
that and take on your your uh.
15:46
Your opinions i'll come back with a technical,
15:51
plant science based podcast next because it's enough about regulations and laws
15:56
and governance and things like that so yeah i thought this might be interesting
16:00
very thanks for the suggestion and see you on the other side,
16:05
that sounds like i'm about to die doesn't it anyway see you on the next podcast
16:08
hear you on the next podcast goodbye.