OVERALL global fertiliser prices are near 10 year lows as production capacity grows and raw material costs drop, benefiting Australia’s agricultural industry.
According to Rabobank’s semi-annual Global Fertiliser Outlook report, demand for urea is projected to increase due to a 26 percent increase in the total winter-crop area.
With global nitrogen prices currently sitting at their lowest value since 2017, Rabobank analyst and report co-author Wes Lefrov said lower cost of production and ongoing low global demand would likely keep prices down.
Indian suppliers are expected to increase ammonia and urea production in 2020 in response to increased domestic demand, reducing India’s significant dependency on the international market.
Coupled with low cost of production, this increased international supply is forecast to keep prices at lower levels during at least part of quarter three.
Mr Lefrov said the global outlook for phosphates would be greatly influenced by input costs, but low commodity price levels and the low cost of raw materials may limit any price increases.
“With utilisation rates at current levels, cheap inputs and commodity prices not incentivising any extra demand, it is difficult to see much upside for phosphate prices on a global level for the next six months,” Mr Lefroy said.
Regional potash prices were expected to be influenced by supply contracts in China and India Mr Lefrov said, as their contract prices were used as a reference for some importers in South America and Southeast Asia.
“With the main demand season getting closer, the prices of potash in these regions are expected to stabilise slightly above those ones locked on contracts,” he said.
However, the report warned that COVID-19 had amplified the risk of isolated shortages and resulting price increases due to reliance on imports.
“Australia is heavily reliant on global imports and, in light of the pandemic, risks are higher than usual – any COVID-19-related interruption to freight may impact availability of urea during winter and spring, especially for orders at short notice,” said Rabobank analyst Wes Lefrov.
Shortages, caused by either freight interruptions or excessive local demand may cause local prices to sharply increase.
Mr Lefrov said a higher-than-previously-expected Australian dollar had supported growers’ purchasing power in recent months.