Australia top agricultural producers have relied on affordable fertiliser to pull through the 2020-2021 winter cropping season. Now, as the outlook of global fertiliser fringes a ‘demand revival’, growers are set to benefit from fertiliser price drops.
In its semi-annual global fertiliser outlook, agribusiness think tank Rabobank says global fertiliser prices have climbed ten-year lows during the second half of 2020 thanks to improved global demand.
The so-called ‘demand revival’ played out most significantly in Brazil and India, two of the top three importers of fertilisers in the past five years.
However, Rabobank’s global farm input team says that the pricing strength of urea and phosphate additives will be tailed off by the second quarter of 2021 when the northern hemisphere demand declines.
“Once seasonal demand from the northern hemisphere subsides, markets will again be exposed to heavy supplies,” the report says.
Australia remains largely unaffected by second-half pricing shift. Farmgate prices for fertiliser will remain in favourable territory throughout 2021.
In a nation that imports 70% of all its fertilisers, the decline in northern hemisphere purchases spells good news for Australian growers in the year ahead.
“For the three main fertiliser products sold domestically, the figures are even higher when it comes to Australia’s reliance on imported product,” says Rabobank agricultural analyst Wes Lefroy.
“For growers, the good news is we expect heavy supplies and growing production capacity will continue to weigh on prices across the global fertiliser market.”
Sustained demand amid challenges ahead
The Australian Bureau of Agricultural and Resource Economics (ABARES) forecasts a 76% increase in winter crop production, thus fueling local fertiliser demand.
Amid supply chain pressures brought by the COVID-19 pandemic, nitrogen sales remain went up by 26% by the first half of 2020, while potassium by 41%, Fertiliser Australia reports.
Urea imports, meanwhile, surpassed two million metric tonnes in August 2020.
A wet summer forecast will likely keep demands robust into 2021 as growers replenish nutrients past the bin-breaking winter crop.
While fertiliser prices are expected to remain favourable, Lefroy cautions of potential drawbacks.
Standing at USc 76, the Australian dollar is relatively weak — a case that could potentially limit importers’ purchasing power. Currently, a 1% drop in AUD approximates a $5-6/tonne price increase.
The threat of COVID-19 also remains imminent, Lefroy warns.
“…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.”