Rabobank says the past year's much-welcomed slide in fertiliser prices should keep sliding, but global fuel costs are on the way up again.
Australia's interest rate rises are likely to resume, too, although the big agribusiness lender has forecast an official cash rate peak not far away from the current 4.1 per cent, at 4.35pc.
Rabobank's August commodity and market outlook has highlighted how world fertiliser supplies are still greater than demand.
Despite a general decline in fertiliser production and a recent gas price-driven surge in global urea values in the second half of July which lifted the market almost 30 per cent in a month, overall urea prices have still dipped 15pc since the start of the year.
A year ago Middle East granular urea was worth about $US445 a tonne (FOB), while the early August price was down to $US400/t.
Since August 2022 the US Gulf price of diammonium phosphate (DAP) has dropped from $US918/t to $US470, or 35pc since January, and potash is 39pc cheaper than in January.
"While there is a long way to go before the end of the current winter crop season, the boundaries for the next one already look much more favourable," said Rabo's farm inputs analyst, Vitor Pistoia.
He would not be surprised to see a substantial nitrogen price percentage decrease in the near future as fertiliser producers European gas market tenders settled down.
Big supply volumes would generally continue to put pressure on global prices, despite recent grain market gains sparked by more shipping disruption and war tensions in the Black Sea.
However, Brazil, which absorbed about 17pc of the global urea trade (compared to Australia's 5pc), had seen some pre-September corn planting season fertiliser purchases at prices about 5pc above market expectations.
Mr Pistoia said unfolding Ukraine war events, including Russia's return to blocking the grain export corridor, had elevated cereal and oilseed prices and may prompt some farmers around the world to invest in more fertiliser for their crops.
Rising tensions in Black Sea ports, including the past week's drone attacks on Russian ships, could also impede crude oil movements, adding to what Rabobank strategists are confident is already a climbing global fuel market.
US demand recovers
Oil traders had been buoyed by stronger than expected US gross domestic product figures in the June quarter, showing the economy expanded at 2,4pc, or substantially more than the 1.8pc forecast, which followed a rise in first quarter activity, too.
"This economic resilience underscores the prospect of higher demand for energy out of the US," Rabobank's report noted.
Brent crude oil prices in August were up about $US10 a barrel to $US85, although still well under the $US110 price of 12 months ago.
Analysts were also watching China to see if any fresh stimulus initiatives firmed up its energy needs.
Translated into an Australian currency value, the international benchmark Brent price has risen from about $117/barrel to $132/barrel in the past month, according to the Australian Institute of Petroleum.
Diesel prices have subsequently jumped from $145/barrel to almost $185, although petrol prices were more subdued, rising only about $10 to $152/barrel.
Mixed economic mood
Meanwhile, although rising fuel prices and continuing strong food inflation will add to cost pressures within the Australian economy, Rabobank noted there were still signs of underlying strength with business and consumer confidence recently picking up, house prices still growing strongly and labour demand driving wages rising at the fastest pace in 11 years.
"Still, overall it remains a challenging market for consumers as inflation rates for many food categories remain in double digits and there is a clear trend towards value as households look to tighten spending," said consumer foods analyst, Michael Harvey.
He noted how weak consumer sentiment globally had prompted food sector companies to boost their spending on marketing.
Locally, while inflationary price growth slowed faster than the Reserve Bank of Australia expected in the second quarter, and retail turnover fell, senior strategist, Benjamin Picton, said the inflation outlook was a mixed picture.
It was still hard to foresee how quickly interest rates may plateau or drift down.
"However the softer tone in the economic data confirms our view that the RBA is close to the end of its interest rate hiking cycle."