Fertiliser prices look good for 2021

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A new Rabobank report predicts good farmgate fertiliser prices are here to stay for 2021, despite a relatively weak Australian dollar.

Fertiliser prices look good for 2021
Rabobank agricultural analyst Wes Lefroy


Good farmgate fertiliser prices are "here to stay" for 2021, according to new data produced by Rabobank.

In the agri-bank’s semi-annual Global Fertiliser Outlook: Demand Revival, released this week, the bank says a plentiful global fertiliser supply and stable currency outlook will be good news for the year ahead.

Improved global demand has seen fertiliser prices rise in the first quarter, the report says, but this is expected to tail-off during the second quarter once demand from the northern hemisphere subsides.

For Australia – where 70 per cent of fertilisers overall are imported – this will mean plentiful supply and lower prices, Rabobank agricultural analyst Wes Lefroy says.

"For the three main fertiliser products sold domestically, the figures are even higher when it comes to Australia’s reliance on imported product," he says.

"During the financial year 2019, 92 per cent of urea, 81 per cent of mono-ammonium phosphate (MAP) and 100 per cent of Muriate of Potash (MOP) sold here was imported."

And of Australia’s domestically-produced fertiliser products, Lefroy said, a number rely on imported raw materials.

"As such, local farmgate fertiliser prices are largely driven by global prices, the Australian dollar and, to a lesser extent, ocean freight rates," he said.

"For growers, the good news is we expect heavy supplies and growing production capacity will continue to weigh on prices across the global fertiliser market."

The bumper winter crop of 2020, which ABARES predicts will see a 76 per cent rise in production year on year, resulted in increased sales of nitrogen, urea and potassium.

With a continuing wet summer forecast, Lefroy says strong demand is likely to remain into 2021 as Australian farmers replenish nutrients following the bin-breaking winter crop.

"A long application lead time and high availability will ensure importers can supply demand for next season and decrease the likelihood of any localised shortages," he says.

Lefroy says while global fertiliser prices overall were expected to remain favourable for Australian producers, one factor limiting importers’ purchasing power would be a relatively weak Australian dollar – which the bank expects will continue to trade near the USc 76 for the next 12 months.

At current urea prices, a one cent drop in the AUD represents approximately a five to six AUD/tonne increase in local prices, he said.

The ongoing impacts of COVID-19 also needed to be considered in the year ahead.

"The resilience of local and global fertiliser supply chains to the impacts of the global pandemic this year has been something to celebrate. In fact, to the end of August 2020, year-to-date urea imports reached 2.1 million metric tonnes, some 300,000 tonnes more than 2019, and 665,000 tonnes more than 2018," Lefroy says.

"However, with case numbers still very high in many parts of the world, the potential for a COVID-19-related interruption to either supply or production remains."

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