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The average price of the most commonly used fertiliser, ammonium nitrate, rose by 231.3%, from £217/tonne to £719/tonne from 2020 to 2022

“Unprecedented” fertiliser company profits jumped by more than 500% from 2020 to 2022, and likely played a key and direct role in persistently high food price inflation, new research has suggested.

Analysis by the Energy & Climate Intelligence Unit showed the three main companies that supplied the UK market with fertiliser – CF Industries, Yara and Origin Enterprises – made a combined net profit of £5.45bn in 2022, raising similar concerns over profiteering recently levelled at oil and gas companies, the think-tank suggested.

It came as the public weathered food price hikes of almost 20%.

The figures represented a huge jump of £4.54bn on the trio’s combined profit of just £909m in 2020, said the ECIU – which also noted how CF had received significant government financial support in the autumn of 2021 to reopen its Billingham plant, amid concerns over the potential shortage of CO2 gas, which is a by-product of fertiliser production.

Driven by high demand and rocketing all-time high natural gas prices, the average price of the most commonly used fertiliser, ammonium nitrate, rose by 231.3%, from £217/tonne to £719/tonne from 2020 to 2022, the ECIU added.

These mark-ups bumped up the fertiliser bill for UK farmers to £1.62bn in 2022, up £1.17bn (or 260%) on 2020’s level of £450m, the research found. Prices had since begun to come down in 2023, but farmers still spent almost double more this year (around the £1bn mark) than they had done at the same point three years ago.

Given how farmers struggling with soaring input costs could not absorb these price increases and retailer profits were largely flat during the past three years, the ECIU said the massive profits earned by the three chemical firms had likely been passed on directly to the consumer and had a material impact on food price inflation.

“With retailer profits holding steady and farmers slightly in the black, it is inevitable that the consumer is footing the bill again, this time in the form of record profits for some of the world’s biggest fertiliser companies driven up by the gas crisis,” said Tom Lancaster, head of land, food and farming at the ECIU.

“With the Bank of England predicting food price inflation to remain high, the effect of high gas prices on our weekly shop is lingering well into 2023.”

But although gas-based fertilisers dominated the UK market, low carbon alternatives were increasingly viable, such as those made from wastes and other residues, the unit said, as it called for a switch away from fossil fuel-based solutions.

Responding to the report, one senior food industry source told The Grocer its revelations were no surprise. “What do you expect when you’ve got a near monopoly?” with the three main players dominating the sector, they said.

They also took aim at government policy, highlighting Defra’s decision to “make it harder for competition to flourish with its restrictions on using urea as a fertiliser”.

The source added: “There was no competition. It’s all very well criticising the industry, but the government did quite a lot to support the price going up.”

Transparency in the fertiliser market was now “absolutely critical”, said NFU crops board chair Matt Culley.

“It’s crucial British farmers have access to better market data to give a clearer picture of fertiliser supplies and security. This includes farmers having access to forward prices and greater visibility on import volumes of fertiliser so they can better manage their costs,” he added. 

“We also can’t overlook the importance of organic manure in helping to ease reliance on artificial fertiliser and associated costs.”