The production impacts of high nitrogen fertiliser prices for arable and grazing livestock in 2023

From the end of summer 2021 and into 2022, global fertiliser prices increased to unprecedented levels. This was due to global gas price rises, increased volatility in many market prices and supply chains due to the war in Ukraine.

In 2022, Defra wanted to understand what the potential impacts of various possible scenarios could be for UK agricultural commodity production, as part of its work to consider the impact on the food chain. 

Two reports, funded by Defra, looked at the arable and grazing livestock sectors. They present the findings of the modelling of four different scenarios ranging from best-case scenario to extreme worst-case, taking into account fertiliser prices, application rates, forward prices and the weather on production and grass yields in 2023.

• If grain prices remain above £200/tonne and oilseed prices above £500/tonne and nitrogen fertiliser was purchased between £700 and £750/tonne, it is most likely that the 2023 fertiliser approaches by cereal and oilseed rape growers, on average, will have a relatively low impact on crop production as long the growing season is favourable.
• The most likely scenario assumes an average application rate reduction in 2023 of 10% compared to 2021 amounts based on conversations with growers and agronomists.
• It is estimated in the most likely scenario for a relatively modest reduction in the UK production of between 0.7% and 1.7% depending on the crop.
• If the potential impact of adverse drilling weather is included, then the overall percentage reductions could be between 5.5% to 7.5% in minor weather situations e.g the dry autumn of 2016 in some parts of the UK.
• For major weather events in winter-sown crops, such as in the autumn of 2019, the combined impact could be between 24% and 30% with spring barley down 8.5%.
• If nitrogen fertiliser prices remain high for several years, then this could have an impact on the soil nitrogen supply in some rotations, particularly those with a high proportion of cereal crops.

• There was found to be an inconsistent relationship between inorganic nitrogen fertiliser usage on dairy grassland and milk production.
• No clear association in the use of nitrogen fertiliser and beef and sheep meat production was found due to the involvement of various factors including use of organic manures and weather.
• As a result of these findings the modelling work instead concentrated on the impact of lower nitrogen fertiliser on grass production for dairy, and pasture carrying capacity for beef and sheep.
• In the most likely scenario, the impact of a 15% reduction in nitrogen fertiliser use on dairy units is estimated to reduce grass yields by 8%.
• For beef and sheep holdings the most likely scenario is estimating a 10% lower carrying capacity on beef and sheep holdings as a result of a 50% cut in nitrogen application rates from an already low typical rate.
• Analysis of rainfall amounts and grass production indicated that a dry year could reduce grass yields, on average, by a further 8%. In wetter years it could be the reverse.
• Farmers are turning to: using more manure, slurry and dirty water; stitch/sow clover into existing pastures; change grazing system to utilise pastures more efficiently or purchase moist feeds.