Cropping

Strategies help navigate shifting fertiliser prices

Liz Wells, February 8, 2024

Stocks of MAPSZC fertiliser ready for pick-up at one of Summit Fertilizers’ five WA depots. Photo: Summit Fertilizers

SINCE 2021, global fertiliser prices have displayed a new level of volatility.

Starting with restrictions on exports from China, and followed by the impact of Russia’s invasion on Ukraine in 2022, it saw Australian urea prices blast out of their A$200-$500/t range seen in the decade prior to new highs of up to $1600/t.

In spring last year, it drifted back to around $650/t, and the spot market is now more like $800/t, with China’s ban on fertiliser exports until April the latest factor to buoy prices.

Industry sources say growers and resellers are trying to better manage this volatility to ensure crop yields can be maximised, but without any parties being “long and wrong” with big stocks in a falling market.

In Western Australia, a relatively stable area of winter crop only, and a defined planting window in April-May, makes its fertiliser supply chain less volatile.

The same rings true for much of South Australia, and also Victoria and southern New South Wales.

It is the southern half of Queensland and the northern half of NSW, where summer and winter crops are grown, and needs vary enormously based on the season, that appears most exposed to price fluctuations and supply-chain disruptions.

Until fertiliser prices start to display stability at levels deemed as good value, growers in the northern region are likely to book their fertiliser needed for planting, and take a punt on urea being available early in the growing season should they have the opportunity to top-dress.

Growers across southern Australia generally have a more solid supply chain than that in the north, which is still recalibrating after Incitec Pivot’s 2022 closure of Brisbane’s Gibson Island, Australia’s only large-scale urea manufacturer.

NSW Farmers grains committee chair Justin Everitt said Australia was producing “very minuscule amounts of fertiliser”, and relied heavily on imports.

“As a result, farmers are having to absorb all the risk when it comes to pricing, because suppliers are reluctant to give us a price when the fertiliser’s not even on the ship,” Mr Everitt said in a statement.

“Ultimately we need a guaranteed and cost-effective supply of fertiliser for food security.”

“Building a fertiliser storage on-farm that can keep moisture out and hold the tonnage required is a fairly large investment.

“While this would be handy infrastructure, not all businesses can justify having this as it can be difficult to get a return on.”

Broking adds up in WA

In Western Australia, good competition exists between the four or so major fertiliser importers, who largely sell direct to growers, most of whom collect from depots at port.

Some, including WAFarmers grains council president Mark Fowler, use established fertiliser brokerage firm AgriAccess to help them cover their requirements.

Ahead of planting, Mr Fowler said he has priced most of the fertiliser needed for the family’s 7000ha of cropping in total at Williams, Wickepin and Dudinin.

“I priced mine in the early stages of harvest, and before the whole Red Sea issue developed,” Mr Fowler told Grain Central last month.

“We’ve done all our phosphorous, 75 percent of our potassium, and 75pc of the nitrogen.

The Fowlers have shedding and tanks to store fertiliser on-farm and are stocking up ahead of seeding.

“We’re picking up at the moment to spread muriate of potash, and then we start bringing in seeding phosphorous; we’re not spreading a lot of super.”

Grower and WAFarmers grains section president Mark Fowler uses a broker to price fertiliser needs spread across three farming districts. Photo: Anvil Media/GRDC

The Fowlers can store mono-ammonium phosphate, or MAP, and urea under the one roof, and tanks can hold Urea Ammonium Nitrate or Urea Ammonium Sulphate.

“We did all our seeding nitrogen requirements some time ago because UAN was at a good price.

“We had all our tanks filled, and ordered product probably around the middle of last year.”

“We ordered another significant tranche based on our concerns about the Red Sea situation, not so much that we wouldn’t be able to get it, but that it would be more expensive due to added shipping costs.”

“A lot comes from the Middle East, and a fair amount…from Morocco.”

“Just about all comes through the Suez Canal; if they have to come around Africa, it’s going to be more expensive.”

Shed brings savings in SA

In South Australia, James Harvey and family run Yalkuri, a mixed-farming operation with a grazing focus.

The shed was built by Grant Sheds of Monash, SA, in 2021 for a cost of $33,005, and measures 7.5m by 15m, and 2.4m high.

Grant Sheds markets the design, which includes a roll-back roof, as being able to hold 120t of fertiliser, and Mr Harvey estimates the shed saves $10,000-$15,000 per annum in efficiency alone.

“Fertiliser sheds are certainly about managing the supply chain…and eliminating some risk.

“It has enabled us to buy not at peak times, and store a reasonable amount on site.

“Invariably, prices creep up in May or June, when everyone wants fertiliser.”

The Harvey family’s fertiliser shed at their home property Yalkuri, near Meningie in SA, features a roll-back roof and was built by Grant Sheds, Monash. Photo: Henry Wells

The Harveys buy superphosphate and urea to fertilise dryland lucerne and 1200ha of cropping country growing barley, canola, vetch and oats.

“We haven’t had to segregate it, but we could by putting a wall down the middle.”

Through having their own fertiliser shed, Mr Harvey said they get a 10pc efficiency dividend through not needing to collect it from the depot in nearby Meningie.

“Depending on prices, there might be another 10pc saved on buying throughout the year.”

The shed has a cement floor and apron to ensure all-weather access, so the agent they buy fertiliser through can deliver a B-double load picked up from Port Adelaide when the price and timing suit.

“If we are spreading with our own super spreader, we can pick up three to four tonnes in one bucket and dump it in spreader.

“You get control of things; you’re not dependent on a contractor doing it.”

“The shed pretty much paid for itself in 12 months to two years.”

The Harveys have a breeding property at Kangaroo Island, and it too could have a fertiliser shed in the not-too-distant future.

“We will probably build a fertiliser shed on our KI place; that’s where you’re talking about delivery of grain to Port Adelaide, and backloading with super.”

The Grant Sheds customer base stretches across SA, and into western Victoria and south-west NSW.

Grant Sheds production manager Danny Halupka said the business saw a “marked increase” in 2021 in demand for fertiliser sheds, probably prompted by the rise in fertiliser prices.

“We believe it’s all got to do with getting fertiliser at the right time and having somewhere to store it,” Mr Halupka said.

Mixed approach in NSW

In eastern Australia, some growers are investing in sheds for fertiliser, with ABC Sheds at Young in NSW being another of the businesses to see an uptick in demand on that front.

“Where we see that predominantly is in northern NSW,” ABC Sheds director Jonny Hornsey said.

“We’re also going over the Queensland border.”

Mr Hornsey said some substantial sheds suited to storing fertiliser were being built, and measuring up to 42m by 18m with a cement floor, and standing 6.75m to the gutter.

This shed was built in 2022 at Biniguy, east of Moree, to hold roughly 1700-2100 tonnes of fertiliser, depending on type. Photo: ABC Sheds

However, the building of large sheds designed to store fertiliser is far from commonplace in the north.

“Because of the humidity around here, silos are fine for storing urea, but storing big volumes in sheds on farm for long periods is not practical,” B&W Rural Moree-based agronomist and director Peter Birch said.

“The big difference up here is we’re farming moisture, and with a full (subsoil) profile, people will only put out fertiliser from now into early in-crop.”

Mr Birch said the region’s growers were more confident about their starter fertiliser requirements some months out from planting once they had a reasonable moisture profile, and were generally prepared to take a punt on getting urea to top-dress if and when they needed it.

“At the end of the day… doing a yearly forecast and committing to it would make it easier for importers.

“Otherwise, we get into this struggle when boats are committed to other destinations.”

That occurs when exporters swing away from Australia to serve other regions’ planting programs in North and South America particularly.

B&W Rural has seven branches and a client base stretching from Narrabri in NSW to Dirranbandi in Qld, and Mr Birch said as a wholesaler, the business was careful to forecast well to minimise its position with importers in a volatile market.

“We’ve had a couple of goes at doing long-term contracts on a US dollar price on boats, and it’s convoluted and it’s messy.

“It’s more pain than it’s worth.”

Yield penalty the risk

Mr Birch said the Bureau of Meteorology’s 72-hour forecasts were “pretty reliable”, but spot availability of urea to spread ahead of in-crop rain was not.

“If you do have urea in storage, you can spread 1000ha pretty quickly.”

At 150kg/ha, that would call for two B-Doubles, or 150t, of urea, which may or may not be available at short notice.

For growers, and for industry generally, copping a yield penalty through not being able to top dress with urea at the right time is the unfortunate consequence of the volatile supply chain.

Mr Birch said the Moree region overall escaped any yield penalty through lack of urea availability last season because in-crop rain was limited, and a widespread call for volume therefore did not go out.

“We didn’t get that big finish to the growing season, but there was an increase in yield for those farmers who had their nitrogen programs in place.

“Those crops did significantly better than the paddocks that didn’t have the extra nitrogen.”

South-eastern Australia was a different story.

“They were absolutely screaming for fertiliser down there, and the growers that couldn’t get it did suffer a yield penalty.”

Anecdotal evidence says southern NSW and Victorian growers were last year chasing spot loads of fertiliser from as far afield as Tasmania and Central Qld, where stocks were being held for top-dressing and rain didn’t arrive to prompt a local call for it.

B&W Rural Goondiwindi manager and agronomist Luke Fing said growers have indicated they would consider pre-booking urea if the price fell under $700/t.

“In April, you can contract it for $750.”

The spot price is now around $660/t, and its direction from here appears to depend largely on whether China lifts its ban on fertiliser exports.

 

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  1. Aus Farmers are helping to push prices higher with their demand for the products. Reduce spreading rates, wait until the AUD is higher to purchase (whilst it is low, it imports are high cost) and send a collective message. We should be making fert in AUS.

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