Australian urea application ahead despite COVID supply risk
skip to content1
Just a heads up, our Online and Mobile Banking Apps will be unavailable between 10:00pm Saturday, 15th August and 6:00am on Sunday, 16th August while we make some improvements. We apologise for any inconvenience.
Rabobank
 

Australian urea application ‘full steam ahead’, despite COVID supply risk – Global Fertiliser Outlook

Low global prices, long-awaited favourable seasonal conditions across most regions and a so-far unscathed supply chain will ensure urea application continues full steam ahead on Australian farms – despite COVID-19 supply risks – according to Rabobank’s latest Global Fertiliser Outlook.

The semi-annual report said overall global fertiliser prices were either at, or near, 10-year-lows, with the plummeting cost of raw materials, growing production capacity and mediocre demand keeping prices of nitrogen (urea), as well as phosphate and potash down.

Report co-author, Rabobank agricultural analyst Wes Lefroy said one of the key factors driving down prices was the falling cost of energy. The abrupt drop in fuel demand during COVID-19 lock-downs forced the price of natural gas down 46 per cent (UK NG ICE) and coal 11 per cent (ZCE Thermal Coal) – both critical to the production of urea and processed phosphates.

Australian urea application

The report said the bank expected Australian winter-crop planted area would increase by 26 per cent this year, up 12 per cent above the five-year average, boosting urea demand.

With La Nina conditions a possibility this spring, Mr Lefroy said, urea application would continue in earnest.

Domestically, local farmers were taking full advantage of reduced input costs – however the recently-released Global Fertiliser Outlook warned that COVID-19 had amplified the risk of isolated shortages and resulting price increases.

“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,” he said.

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

Mr Lefroy said a higher-than-previously-expected Australian dollar had supported growers’ purchasing power in recent months, but Rabobank expects the Australian dollar to weaken to 64USc over the next six months – taking some of the shine off the low global price for Australian farmers looking to lock in fertiliser contracts ahead of next season.

Low prices

With global nitrogen prices currently sitting at their lowest value since 2017, Mr Lefroy 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.

For phosphates, he said, the global outlook 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.

For potash, he said, 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 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.

 

Rabobank Australia & New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of approximately 10 million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 93 branches throughout Australia and New Zealand.

 

Media Contacts:

Denise Shaw
Head of Media Relations
Rabobank Australia & New Zealand 
Phone: 02 8115 2744 or 0439 603 525 
Email: denise.shaw@rabobank.com  

Georgina Poole
Acting Media Relations Manager
Rabobank Australia & New Zealand 
Phone: 0418 216 103
Email: georgina.poole@rabobank.com

 

Privacy Policy
We have to collect some data when you use our website for its functionality and security. We use this data to provide you with a better experience when using our website. For more information you can refer to our Privacy Policy here.