Farmers should plan for average global fertiliser prices to stay at least $100 a tonne higher in the next eight years than they were in the past decade.
That prospect is regardless of whether warring Russia changes its belligerent tactics and ends the squeeze on European gas supplies any time soon.
Independent market research commissioned by Incitec Pivot as it prepares to split its fertiliser and explosives businesses into two companies has forecast nominal FOB pricing for diammonium phosphate (DAP) will average about $750 a tonne ($US505/t) out of Saudi Arabia and China in the six years to 2030.
While that's well down on current prices of about $1150/t, the expectation is for the market to be $100/t above average values between 2010 and 2020, during which markets were typically in the $445 to $600 range, dipping into low $300/t territory in 2020.
The tip for urea, based on US Gulf of Mexico values, is an average $625/t.
The outlook is, again, down from current averages around $935/t, but about $130 higher than the past decade.
Nominal ammonia prices from the US are forecast to be more extreme - around $1000/t compared with a historical average of $645/t, but still considerably better than the current $1360/t.
While Russia's Ukraine invasion and related European gas restrictions have added cost and supply constraints to current northern hemisphere fertiliser production, chairman designate of the planned Incitec Pivot Fertilisers, Mike Carrol, said long term prices and demand would be underpinned by compelling megatrends.
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"Since the 1980s the amount of arable land per person in the world has declined 35 per cent, and United Nations projections say it will fall a further 37pc in the next 30 years," he said.
"Feeding the world is requiring a substantial lift in the productivity of our farming systems."
Mr Carroll said the global population was not only likely to grow by 25pc by 2050, real incomes would double in the same period, which would significantly lift food and protein demand from regions where undeveloped economies dominated and food consumption expectations were low.
Meanwhile, there was no short term sign of any easing in key factors contributing to current high fertiliser prices, including export restrictions from major manufacturers such as China and Russia, elevated energy prices, and high grain prices encouraging crop production.
Decarboning challenge
Furthermore, like all resources used in food production, the fertiliser sector must "decarbonise" its products.
Greenhouse gas emissions associated with the energy intensive fertiliser production process had to be slashed, and nutrient emissions had to be contained on farms, too.
This challenge would not be cheap for the fertiliser industry.
Given the farm sector accounted for 12pc of Australian greenhouse gas emissions, there was increasing pressure on the entire supply chain to reduce its carbon footprint.
Using fertilisers more productively would improve food production efficiency and deliver a better greenhouse gas outcome as less nitrogen released into the atmosphere and more carbon dioxide was captured.
Coated fertilisers, which slowed the release of nutrients to match a plant's ability to absorb them, were already used by leading farmers.
More growers would need to embrace precision fertiliser monitoring and variable rate application strategies, adopt greater use of soil testing to map soil fertility and use drone and satellite imagery to monitor crop nutrient needs.
Value opportunities
"It's clear there will be increased demand for plant nutrients and we'll have to use these nutrients more productively," Mr Carroll told an Incitec Pivot investor presentation spelling out prospects in fertiliser and explosives markets.
For the fertiliser company, the challenges were significant, but they also represented long term "value creation opportunities" which it was well placed to capitalise on.
Incitec Pivot, which has the biggest share of eastern Australia's fertiliser market with about 50pc of sales volume, believed the longer term thematic was very positive for a fertiliser business with IPF's capabilities.
Mr Carrolll said increasingly sophisticated growers would demand the sort of enhanced efficiency fertilisers with nitrogen inhibitors his company offered and was refining in a partnership with the University of Melbourne.
IPF's Nutrient Advantage soil testing laboratory would see increasing demand for its services and sophisticated information to help growers make more precise and efficient use of fertiliser inputs.
Liquid fertiliser
Use of liquid fertilisers was gaining popularity, too, because they were precise, quickly absorbed by plant foliage and had less risk of volatilisation into the atmosphere or leaching into the soil or waterways in wet weather.
Mr Carroll said the company was well positioned to develop the liquid fertiliser market.
It represented just 10pc of total fertiliser volumes sold in eastern Australia, but was a well established trend among croppers in WA and internationally.
Last month Incitec agreed to pay $20 million to buy Yara Nipro's NSW and northern Victorian liquid fertiliser assets to complement its own EasyN liquid business, which it planned to lift to double digit sales growth with help from upscaled agronomic education and promotion efforts.
Also on the agenda was full scale production from its Australian Bio Fert business which combines organic crop waste and manure with carbon and mineral fertilisers and is set to be producing 70,000t a year by 2027.
IPF's investment in bio fertilisers would help the whole value chain reduce emissions and meet new industry standards.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
