INTERNATIONAL urea prices have dropped sharply in recent months, but analysts warn the relief may be temporary and that Australian growers may not see the full extent of the drop at a retail level.
Wes Lefroy, senior agricultural analyst with Rabobank, said urea prices out of the Middle East, a key origin for the nitrogen fertiliser, had dropped from $US902 a tonne ($A1265/t) in November to as low as $US580/t ($A813/t) towards the end of January.
This represents a fall of 35 per cent.
Since then, however, Mr Lefroy said there had been a price gain of $US55/t this week as India, a large buyer of nitrogen fertiliser, stepped back into the market in a meaningful way.
Andrew Whitelaw, Thomas Elder Markets analyst, said while the price drop was welcome it was important to note where current values sat in a historical context.
"Prices have come back but they are still very high compared with what we've seen," Mr Whitelaw said.
Mr Lefroy agreed.
"Despite our expectations for lower prices over the next six months we expect local prices will remain well above average," Mr Lefroy said.
He said the improved availability of natural gas, a key ingredient in urea, in Europe, had been a catalyst for the price fall, as had sluggish sales.
"There have been reports of a urea shortage globally but the two most recent Indian urea tenders were massively oversubscribed," he said.
"In December 1.19 million tonnes was booked after offerings of 2.75m tonnes."
However, he said geopolitical tensions meant there was the threat of prices rising again.
"Russia is important, as a fertiliser producer in its own right and as a supplier of natural gas," he said.
"Whatever happens in that Black Sea region will be followed closely by the fertiliser industry."
Barry Large, Grain Producers Australia chairman, said most Australian farmers were yet to lock in all their urea needs for this year.
"Like marketing our grain our advice is to hedge as much as possible and to not leave yourself exposed to one price," Mr Large said.
"You might not get the lowest price overall but you won't be exposed to the risk of big price rises either, it is all about mitigating risk."
He said farmers were figuring out the best way to approach fertiliser management this year.
"Some will look to see whether there are any areas they can cut down application to help save some dollars, I think in general people will be trying to defer those decisions until later in the season when they have more idea both of growing season prospects and grain prices.
"We know we're currently at decile 9 or higher fertiliser prices and we know it will come back at some stage but we don't yet know if further price relief will come in time to be of use to us."
Availability of product is also something farmers are factoring into their decision making, with some potentially taking hold of supplies earlier than usual to avoid any international disruptions that could cause delays in product reaching Australia.
"We predict freight interruptions will continue to plague urea deliveries which may cause some delays," Mr Lefroy said.
GrainCorp managing director Robert Spurway said farmers were getting in early with orders.
"Urea remains a significant on-farm expense despite the drop in prices, fortunately grain prices also remain high and seasonal conditions remain optimal, so we understand many growers have planned ahead to ensure they have fertiliser and other inputs required," Mr Spurway said.
Further out, he welcomed new developments within the Australian fertiliser manufacturing sector.
"We understand the government is working with industry to significantly increase the local production of urea, and naturally we welcome any moves to build onshore supply chain resilience."
There has been no similar fall in the phosphorus market, with the Chinese ban on exports still keeping prices high.
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