FARMERS cannot rely on fertiliser businesses keeping large volumes of unpriced stock on had and instead must forward plan to ensure they get the best price along with guaranteed supply.
That was the viewpoint of an expert panel at a recent Grain Producers South Australia (GPSA) webinar on the topic of urea supply.
Sean Cole, GrainGrowers advocacy and rural affairs manager, said farmers needed to weigh up the need for timely supplies versus minimising costs when making their purchasing decisions.
"The fertiliser business is basically a cash and carry model and you don't want to get short when you need the product, so if you feel you see that nitrogen fertiliser is at a price where you can make money from the purchase you'd be sensible to think about it," he said.
Andrew Whitelaw, Episode 3 commodity analyst, said farmers could not rely on buying forward and storing the product as means to lock in lower prices due to the logistical issues with storing granular fertiliser for long periods.
"I'd be very hesitant to store expensive fertiliser unless the farmers have the dedicated storage capabilities to ensure they don't have a product they cant put through the chute when they go to get it next year," he said.
"For me a more logical step would be to lock in a contract with a price you find attractive with a delivery date that suits."
Mr Whitelaw said in light of recent controversy regarding fertiliser contracts,which saw the ACCC move to get fertiliser companies to alter unfair contracts, farmers should look closely at the terms and conditions.
"It is good practice, whatever the contract, to make sure you have a thorough understanding of what it involves."
In regards to timing of purchasing he said no plan would be universally successful.
"Ensuring supply is the main concern, no strategy in terms of pricing is going to work every year, commodity markets aren't like that."
"A diversification of timing, combined with, if possible, a diversified lot of suppliers, is best, as is weighing up the individual factors at play in a particular year, such as price and weather outlooks."
Mr Whitelaw said volatility within fertiliser markets globally meant businesses were less likely to take long positions than they once were.
"The responsibility of the companies is to make profits for their shareholders, not to maintain supply for growers, there may be the chance for growers to pay a premium to ensure they carry stock all year, but it is not just going to be there as a service."
Stephen Annells, Fertilizer Australia executive manager, said it was in the interest of the industry to ensure growers had access to as much supply as they needed, but added the volatility of markets meant suppliers did not want to take on too much risk.
"There are some long memories out there of 2008 when businesses had stockpiles of product and they were caught out with a significant discount in the market."
"These guys are taking positions over 50,000 tonne shipments, compared to growers over 50 or 100 tonnes, so there is a lot more risk at play and no one wants to go too hard when the market is falling quickly."
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