Uncertainty leads to urea spike

Uncertainty leads to urea spike

Grain
Urea prices have kicked in recent weeks.

Urea prices have kicked in recent weeks.

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Urea prices have risen by up to $50 a tonne in recent weeks as farmers look to lock down supply following recent herbicide shortages.

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THE FUNDAMENTALS have not altered from a month ago when fertiliser retailers were spruiking the low cost and good availability of nitrogen (N) based urea fertiliser, but prices have shot up around $50 a tonne in the past fortnight.

The declining Aussie dollar and the potential for a slight spike in demand for the fertiliser out of India and the US are two factors behind the rise, but a Rabobank crop input analyst has said a change in buying patterns is the major driver.

"With the high amount of risk around global trade at the moment we've seen a real shift in the way farmers want to approach their fertiliser purchases," said Wes Lefroy.

"Formerly they were making their purchases just in time, now they've changed to ordering just in case."

Mr Lefroy said the international value of urea, in Australian dollar terms, free on board in the Middle East, the major origin for urea, had risen from $350/t to $390/t since mid-February.

Retail values are around $500/t for May delivery, rising to $540/t for June. Quotes of $480/t were available as late as mid-February.

However, he said given Australian imports for the 2019 calendar year were relatively strong, up 180,000 tonnes on 2018 at 1.93 million tonnes he felt there would still be some unsold supplies in sheds.

"Imports were strong and while there was some use of urea in the south sales were down, so you would feel there is still a fair bit of product in the country."

"The biggest concern, is a lot of uncertainty around world trade and that is translating into sales, especially given there are a number of areas that have had reasonable rain for the year already."

Andrew Weidemann, Grain Producers Australia chairman, said the early season break in parts of the east coast combined with the uncertainty of delivery had led people to making earlier purchasing decisions than anticipated.

"We've seen a lot of good rain, here in the eastern Wimmera I would even say we've had the autumn break which has created demand, and I think people saw what happened with the shortages in glyphosate and decided to get in early," Mr Weidemann said.

Mr Lefroy said unlike herbicides, urea was not a major Chinese export and not exposed to the coronavirus concerns that hit the herbicide market when news of the epidemic first broke, but added there was market concern about reliability of all imports as the disease becomes more of an issue across the globe.

He also said the declining Aussie dollar was contributing to the price rise, but said farmers would not necessarily be concerned about this as it made Australian grain exports more competitive on the world stage.

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