Kristin Murdock, Naracoorte Community News
Fertiliser is one of the highest input costs on farm, and knowing what happens within this market is important. In good news for Australian farmers, the fertiliser market has started coming off, with prices falling over the past month.
According to independent market analyst, Andrew Whitelaw from episode3, natural gas prices have fallen in recent months and as the main input in urea production, gas prices have led to urea falls.
“Whilst the urea pricing in Australia is not advertised, we are hearing of offers in the range of the high A$600s to low A$700s,” Mr Whitelaw said. “This is good timing ahead of seeding. A cost price squeeze occurred in recent years, but the ratio of wheat/canola to urea has come back to more normal levels.”
Mr Whitelaw said he has been closely monitoring fertiliser markets for a long time.
“The primary input into urea is natural gas (or coal in some nations). The gas prices rose dramatically last year, in large part due to the invasion of Ukraine,” he said.
Charts show that over the past year the monthly price of natural gas and urea have followed a similar trajectory. When gas prices fall, so does the price of urea.
At the same time global fertiliser demand globally has dropped. There was a tender by India for 1.1mmt, however, this wasn’t enough to quell the huge oversupply on the market at present. Buyers are starting to purchase hand to mouth and ride the wave down.
Mr Whitelaw said that anecdotally, there is talk of urea prices dipping to the high A600s / low A$700s.
“A far cry from the prices experienced by farmers last year.” he said. “We were the first independent analysts to produce a ‘landed Australia’ urea price. This modelling is the price of wholesale purchase of urea in the middle east with freight and unloading in Australia”
“Whilst this to the chagrin of some ‘players’ in the fertiliser space, it provides an idea of the trend of the replacement value of fertiliser in Australia. The current replacement value of urea in Australia is in the mid-A$ 500s, although it is important to include that this does not include finance costs, margins etc.”
The good news is that the price is starting to fall in line with overseas values.
“In theory, the price of fertiliser doesn’t really matter if grain prices are high. We track the landed model against the sales price of grain – how many tonnes of grain required to purchase a tonne of fertiliser.”
Mr Whitelaw said that after a period of huge blow outs and cost price squeezes, we are seeing fertiliser come back into a more normal realm.
The concern for his team of analysts is the lack of Australian fertiliser pricing transparency, something they are gathering information about through a census.
“With farmers’ help, we can go a little further. We ask farmers around Australia to anonymously provide us with the quotes they are receiving for fertilizer,” Mr Whitelaw said.
For more information or to complete the census, go to episode3.net/inputs/we-need-you-to-help-with-fertilizer-price-transparency/.
This article appeared in the Naracoorte Community News.
