Farmers in Europe’s top grain-growing country have, in the face of elevated prices, slashed forward purchases of fertilizers for 2023 crops.

Production costs for French farmers fell in July by 0.7% month on month – ending an unbroken run of increases stretching back to September 2020, the country’s agriculture ministry said.

“This reversal is linked in particular to the fall in fertilizer and energy prices,” the ministry said.

‘Up very sharply’

The dip in fertilizer prices came in the face of a stand-off by growers, who have withheld purchases in the face of prices which remain near multi-year highs.

“The price of basic nitrogenous fertilizers… remains up very sharply over one year,” by 111%, the ministry said.

Deliveries of nitrogen fertilizers fell “sharply” year on year, by 14.5% for July, the start of the nutrient’s marketing year.

Deliveries of phosphate and potash nutrients, the other two main fertilizer types, dipped “very sharply”, by 48% and 52% respectively, for the May-to-July period, the first three months of their marketing year.

‘Continued tensions’

The July dip in French fertilizer prices represented a second successive month in values from May’s multi-year high.

However, the fall, at 2.5% over the two months, remains “slight”, according to the ministry, which signalled cause for expecting prices to remain elevated.

“We are witnessing continued tensions on the world fertilizer market, fuelled by the war in Ukraine”, which has provoked a particular spike in prices of natural gas, the key raw material for makers of nitrogen-based nutrients

“Difficulties in the supply of gas, with limited availability and the price of which is rising sharply, are leading to reductions in the production of nitrogen fertilizers by the main European manufacturers, while imports are subject to high freight costs,” the ministry said.

A series of nitrogen producers, including CF Industries and Yara International, last month announced production cuts in the face of gas prices which continued to rise to late August, as Russia, the world’s biggest exporter, limited flows to Europe in what was deemed by many commentators as a political move.

Gas prices, as measured by benchmark Dutch prices, have since fallen back to E196 euros per megawatt hour, more than 40% below their high, amid European moves to limit energy prices.