A leading farmer organisation has said targeted co-investment and favourable government policy settings will be critical in helping businesses set up domestic fertiliser manufacturing capacity.
In its Fertilisers of the Future report, GrainGrowers has identified locally produced fertiliser as a key to providing better fertiliser security for Australian growers and said it sees the creation and retention of onshore facilities as critical.
It comes as Rabobank issued a report saying Australian farmers will be looking for more fertiliser next year with forecasts for higher application rates and overall demand primarily sparked by improved affordability of fertiliser.
In it's Australian Fertiliser Outlook 2024-25 the bank said Australian fertiliser consumption had dipped by 20 per cent in 2022 on the back of record high fertiliser prices, driven up by factors such as COVID-19 and the Ukrainian conflict.
However, with prices now returning to more average levels and farmers seeking to replenish soil nutrients, another potentially good winter crop planting next year should result in a strong recovery in fertiliser demand, according to report author, Rabobank farm inputs analyst Vitor Pistoia.
He said farm input costs had begun to decline substantially from mid-last year, allowing fertiliser affordability to improve back close to historically-average levels, despite significant drops also being experienced in the prices of agricultural commodities such as grain, oilseeds, beef and dairy.
Mr Pistoia said the largest price relief for fertiliser had come late in the buying period for the 2023/24 cropping season, so a recovery in demand and application rates was most likely to be seen in the coming 2024/25 season.
Further support for a recovery in demand would also come from farmers wanting to replenish depleted soil nutrients, after three years of good crop yields, he said.
The GrainGrowers report looked at the major three fertiliser inputs in Australian broadacre cropping nitrogen, phosphorus and potassium and the outlook over the coming five years, including whether there could be potential emerging technologies that improve pricing and availability.
GrainGrowers chair Rhys Turton said the current issues around urea supply, which has seen regional shortages emerge even in light of record national imports, highlighted the report's importance and the need for productive discussion about progressing the issue.
"The tight supply of urea emphasises our reliance on imports, and if we are to solve this problem, we need to look carefully at technologies and projects under development and see how we maximise the available opportunities," he said.
Mr Turton said an inputs roundtable hosted by GrainGrowers in March had discussed the need to look more closely at the domestic manufacture of fertiliser and its role in providing fertiliser security and the role of government in facilitating this process.
The report identified significant up-front costs for establishing production capacity for cleaner, lower-cost fertiliser production initiatives, which Mr Turton called on government to help fund.
"We believe there is a clear role for government to provide targeted co-funding to help develop a lower cost, more environmentally sustainable, domestic manufacturing base."
In particular Mr Turton nominated urea/nitrogen as a key focus, with Australia currently importing all its needs.
"This reliance is due to high manufacturing cost structures, particularly for those using natural gas to produce ammonia and urea."
"Emerging technologies such as green urea or ammonia decarbonisation technologies used at a farm level through decentralised hubs show promise but are currently uncompetitive with existing technologies."
Mr Turton said the fact it took an average of eight to 10 weeks to import additional bulk fertiliser highlighted the potential benefits of reducing reliance on overseas supply.
"We need a domestic, lower cost, more reliable supply chain that reduces our dependence on overseas supply."
Mr Pistoia said growers could look at sourcing product outside the typical purchasing window as a means to manage volatility.
"Anticipatory procurement is a strong contender as a 'budget saviour'," he said.
"By the end of the year, the majority of farmers are focused on harvest, which typically results in a period of low fertiliser demand."
"This could lead to buying opportunities for farmers in the last quarter of 2023, with early buyers potentially avoiding a period of much stronger demand in the first quarter of 2024, the usual procurement period."