Ambrose Haulage has been backloading this and last week with urea collected from Fisherman Islands in Brisbane. Photo: Ambrose Haulage
EASTERN Australia’s supply chains for diesel are recovering but urea remains in critically short supply for those without orders in place as markets adjust to shocks sparked by the Middle East conflict.
Urea is nominally trading at up to $1400 per tonne, compared with $850/t in the week prior to the February 28 escalation in hostilities between Iran and US-Israeli forces.
The conflict has effectively closed the Strait of Hormuz, which sits between Australia and roughly 40 percent of its urea supplies, as well as a chunk of the crude oil which goes into making fuel imported by Australia.
With panic buying to blame, some service stations and resellers have run out of diesel, but bulk fuel is still getting to farms and transport operators to keep fleets and machinery rolling.
Even if urea becomes readily available in May to top-dress crops, its price looks unlikely to come down unless Middle East manufacturers can safely resume operations and exports.
That means Australian growers are now looking at swinging out of crops like canola, milling wheat, and durum that have a big appetite for in-crop urea, and into low-input crops like oats, barley, and pulses.
Urea harder to get in some areas
Grain Central has been told Australian fertiliser importers are working to find sources of urea to supplement the shortfall related to the halting of Middle East production and shipping.
That includes increased volume coming from Brunei and Vietnam due to berth next month, but sources are quick to point out they will provide nothing like the amount that normally comes from the Middle East.
Growers generally have their fertiliser planting needs covered, but top-dressing is another story, and if you live in an irrigation district, so is the price of water.
On fuel, delivery is slower than normal, ostensibly because panic buying has created a demand spike that suppliers have had to fill on top of normal orders, and additional volume is being sought in readiness for cotton picking and winter-crop planting.
At Lake Cargelligo in south-central New South Wales, Summit Ag agronomist director Emma Ayliffe said diesel is available, but on-farm prices have risen from around $1.77 per litre to more than $3 in some cases now.
“We’re seeing that guys can get fuel, but if they put in an order now, it’s not this week they get it, it’s next week.”
Because of its distance from the major hubs of Geelong and Brisbane, supplies of both fuel and urea are said to be particularly tight in the Central West of NSW.
Reports are kicking around of urea at $1900/t delivered, but sources generally say $1500/t on farm was the peak as of yesterday.
“The feedback on urea is it’s expensive and there’s no guarantee you’ll get it when you want it.
“A lot of the conversation is: Are we even going to bother putting in crops?
“We’re starting to have conversations about some pretty dramatic crop swings; guys are not interested in growing wheat, and there’s a bit of nervousness about canola.
“I think we’ll see a fair shake up.”
Lupins and faba beans are generating some interest as a broadleaf alternative to canola, and a significant area earmarked for wheat looks like it will go into other cereals.
“The Central West is good oat country; I think we’ll see an increase in oats for grain and hay, and for irrigation country, we’ll see a fair wedge of barley; if we do get a water, barley’s more responsive than wheat.”
As wheat and cotton prices remain historically low, Ms Ayliffe said the limited outlook for watering crops planted this year makes one option look like the winner.
“Your best return on investment is to sell your water and go on holidays; I’ve told lots of guys that.”
SOA in demand
In northern NSW, where summer cropping is an option, growers may elect to fallow additional country because of the high cost and uncertainty of supply around urea, and because of limited subsoil moisture.
Most growers in this versatile region have fertiliser in the ground already which will be ready for their next summer crop if they decide to reduce winter-crop area.
Growers still keen to plant canola, which requires sulphur as well as nitrogen to perform well, are chasing Sulphate of Ammonia.
“We’ve sold a lot of Sulphate of Ammonia; it has around half the N of urea, but it’s good for canola,” Marnco managing director Mark Been said.
SOA contains 21-percent nitrogen and 24pc sulphur, against urea with 46pc N, and no sulphur.
At around $600/t ex port, it is in hot demand, but its stocks have also run down.
If any nations outside the Middle East can ramp up fertiliser production in coming months, Australia is likely to meet strong competition in the Asia-Pacific region from India as it looks to establish and feed its kharif, or summer, crop.
“Now it’s a supply issue, not a price issue; we’re competing for limited tonnes,” Mr Been said.
“We’re so reliant on the Middle East, and we’re so reliant on just-in-time.”
Backloads for some, fuel flowing
Goondiwindi-based transport company Ambrose Haulage runs 35 trucks, and its managing director Jim Ambrose said their fuel supply has not been affected since shipments out of the Strait of Hormuz stopped last week.
Ambrose Haulage has also been able to backload with urea after delivering bulk sorghum into Brisbane.
“We’ve been loading fert out every day; our customers are jumping on every load they can get,” Mr Ambrose said.
Fuel is also making its way out west.
“I think what’s happening is farmers and transport companies that have had a relationship with a supplier are getting fuel.
“What I’m picking up is that it’s the reseller…that will be reduced deliveries until this all blows over.”
“Is there some price gouging going on? Maybe; I have heard of a price difference in suppliers of $1.88 against $2.20.”
Mr Ambrose and others said panic buying in Australia appears to have created much of the fuel price rally in the past 10 days.
One company in Victoria told Grain Central that vehicles looking not just to fill up, but to fill jerry cans and other storage containers, had been following their tankers to delivery points.
“It’s just ridiculous,” the company spokesperson said.
A regional account manager for a major bulk fuel business concurred.
“The biggest drama is we’ve had an unprecedented amount of panic buying.
“We have plenty of trucks; we just don’t have any trucks to supply panic buying.
Ahead of cotton picking from next month, and winter-crop planting to follow, the manager said: “we’re definitely getting fuel out to our farmers.”
He agreed with Mr Ambrose’s summation that smaller independent fuel suppliers were probably feeling the pinch in supply.
“I can’t help them; I say: ‘Mate, I’m looking after our loyal regular customers first.”
Speaking on ABC Radio South Australia Regional Drive program on Tuesday, Federal Minister for Industry and Innovation Tim Ayres said Australia’s fuel situation was not cause for alarm.
“We have the fuel reserves in the strongest position that they have been in for 15 years, so we are well prepared for these global events, as unwelcome as they are,” Mr Ayres said.
Also on Tuesday, Federal Minister for Agriculture, Fisheries and Forestry Julie Collins mentioned in Question Time that fuel stocks were at their highest in 15 years, but some regional communities were being impacted by supply chain issues.
“We know that fuel continues to arrive in the quantities and frequency that we need, with more shipments due within the week.
“We’ve also heard that much of the input products for the upcoming planting system, including the majority of fertiliser required, is already on the water or is already in the country.
“Farmers are rightly looking ahead and they are planning.
“We understand the importance of fuel and fertiliser to a productive system, which is why we are also making sure that we have supply chain resilience as a key priority of our National Food Security Strategy, which will help safeguard Australia into the future.”
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