Global fert trends keep prices soft despite crop season action

Nitrogen and phosphate prices are roughly at 10-year lows, despite the sinking Australian dollar making import costs more expensive in the past three years.  

Livestock producers have also been taking full advantage of good value trends in the pasture nutrition market.

Strong returns for wool, lamb and beef have helped fuel a busy summer and autumn of pasture topdressing.

Helpfully, single superphosphate prices are 10 per cent cheaper than a year ago.

On the cropping front, falling global urea prices contributed to an 80pc jump in Australian nitrogen product imports to almost 260,000 tonnes in January and February.

The demand lift followed last year’s surge of mid-season nitrogen use on cereal crops after several months of good rain.

Unusually for this time of year, when fertiliser prices generally rise in response to sowing season needs, urea prices have slipped about $60 a tonne (at port) since Christmas, according to the Australian Fertiliser Services Association (AFSA).

Mono-ammonium phosphate (MAP) prices are also $50/t to $100/t cheaper than a year ago at about $560/t (port).

And that’s despite a kick in global export phosphate spot values from $US330/t to around $US370 ($500) since December.

“It’s a pretty good time for farmers to get an advantage from cheaper international phosphate markets and the softening nitrogen price trend,” said AFSA president, Craig Swan, a South Australian fertiliser supplier and contractor.

“It’s turned into a busy time all round since harvest ended, particularly after last month’s rain over south-eastern Australia.

“It’s all guns blazing now - our trucks are flat out running to and from port collecting supplies.”

Mr Swan, from Miningie in South East SA, said this year’s scramble to supply and apply fertiliser had been intensified by last season’s surprisingly big yielding winter grain harvest which had depleted soil nutrients.

The late harvest finish in southern Australia also left many farmers running late with their pre-sowing programs, narrowing the window for fertiliser applications.

At the same time, space to store bulk fertiliser purchases on-farm was limited because much more grain than usual continued to be held in farm sheds or other storage sites.

This season’s cheaper phosphate values will be particularly useful for canola growers who are expected to increase plantings by 20pc to 30pc on 2016’s 2 million hectare crop.

Canola consumes roughly twice as much phosphate as cereals.

Landmark’s national fertiliser procurement manager, Paul Lomax, said continued expansion in pulse crop areas at the expense of cereals would also underpin demand for phosphate products.

“There’s still a lot of interest in chickpeas –  particularly after good rain in Central Queensland –  and lentils, field peas and faba bean planting intentions are also looking fairly strong,” he said.

“Grain legumes aren’t as hungry as canola, but they do like phosphate.”

However, Mr Lomax said “soft” market trends for nitrogen, phosphate and potash would not necessarily prompt farmers to pump more fertiliser effort into crops than would normally be expected.

“Fertiliser demand mostly follows soil moisture availability,” he said.

“At the moment I’d say demand is similar to last year, particularly as some areas have moisture deep down but need more rain before a lot of cropping activity really gets going.”

Croppers generally budgeted for nutrition to represent 11pc to 15pc of their crop input costs, but this year was more likely to see them pocketing some savings rather than applying extra nutrients for good luck.

“Our advice is always to soil test and plant tissue test first, then tailor fertiliser needs in response to those results,” he said.

Rabobank analyst, Michael Harvey, expected weak international grain values to keep global nutrient markets “under pressure” for much of 2017.

However, some products arriving in Australian had risen in value during the peak import period prior to winter crop sowing.

“We import about 50pc of the fertiliser we use between January and June, so there’s always a bit of a rally in prices in that period,” he said.

Ameropa Australia’s chief executive officer, Jim Mole, anticipated Australian importers would be locking in new overseas orders within weeks, although most were holding off until the last minute hoping to pick the lowest possible price.

“The world’s awash with a fair bit of urea and phosphate, but it only takes a slight drop in our exchange rate or some hiccup in the US market and prices suddenly jump,” he said.

Rabo’s Mr Harvey doubted if markets were oversupplied, but extra production capacity and cheap energy, were keeping pressure on prices and adding to volatility.

China had scaled back its massive urea export agenda in response to weak price trends, but the US was on track to eventually be a net nitrogen exporter as new plants tapped into shale gas reserves.

Fresh phosphate production capacity was also coming online in the Middle East and North Africa.

However, the world's largest phosphate exporter, Morocco’s state Office Cherifien de Phosphate, has tipped global production would ease before it increased, and rising global phosphate prices were likely to continue this year as the phosphate market had hit the bottom of its cycle.

Average potash prices have been flat on Asian markets for about six months, and North American selling prices slipped early this year after a pre-Christmas rise, but Canadian giant PotashCorp is tipping rising demand for the rest of the year.

Last year it shipped 60m tonnes, but this year volumes could be closer to 64m.