Paul Connaughton Snr (Galway East, Fine Gael)
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Question 217: To ask the Minister for Agriculture, Fisheries and Food the reason fertiliser prices are so expensive in 2009 in view of the fact that the price of crude oil is much lower than the same time in 2008; the other factors that influence the present cost of fertiliser; and if he will make a statement on the matter. [7851/09]

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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Changes in fertiliser costs, in common with all elements of intermediate consumption for farmers, are principally a function of market forces, primarily operating at international level in this instance. CSO preliminary estimate for 2008 shows that the price of fertiliser increased by 61.4% compared to 2007, which was an unprecedented increase. This extraordinary price increase in 2008 resulted from:

The high cost of oil in 2008 to manufacture fertiliser, upon which it is is heavily dependent

High shipping cost in 2008 resulting from increased global economic activity

Increased global demand for fertiliser for the production of biofuel crops, to replace high priced fossil fuels.

Increased demand for fertiliser by emerging economies, such as India and China, to increase food output and

Increased demand for fertiliser to increase animal feedstocks, which were low globally.

The recent down turn in global economic activity and especially much reduced oil price have reduced transport and manufacturing costs of fertiliser. Nevertheless, fertiliser prices have not fallen as quickly as expected, due mainly to the carryover of expensive stocks from 2008. Furthermore, since the closure of IFI in 2002, Ireland has no indigenous inorganic fertiliser production and as such is a "price taker", being as we are, totally dependent on imports. Furthermore, Ireland's location on the fringe of Europe implies increased shipping costs and a lack of economies of scale as regards shipping.

It should be remembered that it is still early in the season for fertiliser application onto crops and grassland, and farmers are holding back making purchases in anticipation of price falls, which is why it is difficult to predict prices for 2009 at this early stage of the cropping year, as very little fertiliser has traded.