Fertiliser price expected to remain affordable for growers

More affordable fertiliser prices supported growers to higher profits through the 2020/21 winter cropping season, and the same conditions are in place moving forward.

This is due to a plentiful global fertiliser supply – and a stronger aussie dollar – it spells good news for growers in the year ahead.

And according to agribusiness report, Semi-Annual Global Fertiliser Outlook: Demand Revival.

And while the report revealsglobal fertiliser prices had climbed off their 10-year lows during the second half of 2020 – primarily due to improved world-wide demand – this newly-found price strength was expected to tail off during quarter two of 2021.

“Heavy supplies and growing production capacity will continue to weigh on prices across the nutrient complex,” the report says.

It is expected global urea and phosphate prices will remain stable until the start of quarter two, supported by northern hemisphere demand.

However, once that seasonal demand had subsided, global markets would again be exposed to heavy supplies, the report says.

And for Australia – where 70% of fertilisers overall are imported – that means favourable farmgate prices for fertiliser should be here to stay for 2021.

For the three main fertiliser products sold domestically, the figures are even higher when it comes to Australia’s reliance on imported product, the report said.

During the financial year 2019, 92% of urea, 81% of mono-ammonium phosphate (MAP) and 100% of Muriate of Potash (MOP) sold here was imported.

And of Australia’s domestically-produced fertiliser products, a number rely on imported raw materials.

As such, local farmgate fertiliser prices are largely driven by global prices, the Australian dollar and, to a lesser extent, ocean freight rates.

For growers, the good news is that it’s expect heavy supplies and growing production capacity will continue to weigh on prices across the global fertiliser market.

Local demand

Our recent bumper winter crop – production is forecast to increase 76% per cent year on year – had fuelled local fertiliser demand, the report said.

Nationally, according to Fertiliser Australia, nitrogen sales were up 26% year on year during the first half of 2020 and, despite COVID-19’s supply chain pressure, urea imports passed two million metric tonnes in August 2020  – well above the preceding three years.

Potassium sales were also up 41% year on year.

With a continuing wet summer forecast, the report indicates strong demand was likely to remain into 2021 as local farmers replenish nutrients following the bin-breaking winter crop.

A long application lead time and high availability will ensure importers can supply demand for next season and decrease the likelihood of any localised shortages, the report indicated.

Potential challenges

And while global fertiliser prices overall were expected to remain favourable for local growers, one factor limiting importers’ purchasing power would be a relatively weak Australian dollar.

Which the banking industry expects will continue to trade near the USc 76 for the next 12 months.

At current urea prices, a one cent drop in the AUD represents approximately a five to six AUD/tonne increase in local prices.

The ongoing impacts of COVID-19 also needed to be considered in the year ahead.

The resilience of local and global fertiliser supply chains to the impacts of the global pandemic has been something to celebrate.

In fact, to the end of August 2020, year-to-date urea imports reached 2.1 million metric tonnes, some 300,000 tonnes more than 2019, and 665,000 tonnes more than 2018.

However, with case numbers still very high in many parts of the world, the potential for a COVID-19-related interruption to either supply or production remains.

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