Urea application unaffected by COVID-19

By Jamie Salter

Low global prices, favourable seasonal conditions and an unaffected supply chain despite COVID-19 will ensure urea application continues on Australian farms, according to Rabobank’s latest Global Fertiliser Outlook.

The report found global fertiliser prices were near 10-year lows, as low cost of raw materials, growing production capacity and average demand are keeping prices of nitrogen (urea), phosphate and potash down.

Report co-author Wes Lefroy said one of the key factors driving down prices was the falling cost of energy.

The drop in fuel demand during COVID-19 lockdowns forced the price of natural gas down 46 per cent and coal 11 per cent — both critical to the production of urea and processed phosphates.

The report predicted an increase in the Australian winter crop planted area by 26 per cent this year, up 12 per cent above the five-year average, which is boosting urea demand.

“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,” Mr Lefroy said.

Shortages caused by either freight interruptions or excessive local demand may cause local prices to increase.

Mr Lefroy said the Australian dollar had supported growers’ purchasing power, but it was expected to weaken over the next six months.

Global nitrogen prices have recorded their lowest value since 2017 and the lower cost of production and ongoing low global demand should keep prices down.

For phosphates, the global outlook would be greatly influenced by input costs, but low commodity price levels and the low cost of raw materials may limit 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.

For potash, regional prices were expected to be influenced by supply contracts in China and India, with their contract prices used as a reference for some potash importers in South America and South-East 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,” Mr Lefroy said.