It's the perfect storm of pressures that's seeing fertiliser prices go through the roof, putting pressure on growers to contemplate their next move.
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The major advice from pasture and cropping experts is, to borrow the maxim from the pandemic, to "test, test, test". That is, test soils before applying fertiliser to next year's crop and be all over variable rates needed in a paddock.
Many in the industry believe urea prices could hit $1400-$1500 a tonne by next March. The strong advice is to consult with suppliers early on, according to NSW DPI Director of Pastures Mark Evans.
He warned that soil testing at the right time leading into next year's crop was vital, and to avoid testing when there might be mineralisation of nitrogen in the soil after rain.
James Dunlop, Business Development Manager at Pacific Fertiliser, says the price of fertiliser is volatile but there was obviously an upward price trend.
"There is the potential for urea to hit $1400 per tonne if current supply restrictions persist," he said.
"Product will be available next year, it's just what price it will hit," he said.
A perfect storm of events had conspired to see fertiliser prices rise. The contraction of manufacturing in China, rising gas prices in Europe, COVID-19, restrictions on Chinese exports, high demand domestically and the rise in sea freight costs - had all added to a price squeeze.
"Some may consider options such as an organic product if more readily available domestically," he said.
"People will start to look at what is available and what to use many months out, and also consider all the elements that can affect a season. Some may consider using a natural product."
"Prices have been on a continuous rise over the last six months with single super phosphate trading around the mid $300 in March / April and now trading above $500 port. MAP & DAPs trading around mid $700 in Q2 to now trading in the mid $1200s, and urea up from the high $500s to now above $1,300 / tonne ex-port."
Mr Dunlop said Australia had some of the most fragile soils in the world and growers would have to consider appropriate fertiliser use for maximum benefit in their particular area. With good rainfall expected through this summer, next year's crop could be as big as this year and so fertiliser will be in high demand again.
Meantime, ANZ has suggested this could see a fall in sheep and cattle prices next year due to a fall in interest in restocking, because of the fertiliser costs.
The rapid rise in fertiliser prices could put downward pressure on Australia's record cattle and sheep prices, particularly if the price hike continues well into 2022, ANZ's latest Agri Commodity Report says.
"The rise in fertiliser prices caused by a range of global events could have a number of ripple-on events to Australian farmers, and indirectly, to the local food supply chain," ANZ said.
Michael Whitehead, ANZ's Head Food, Beverage and Agribusiness Insights said: "The causes of the current spike in fertiliser prices could potentially stay active for some time, particularly given past comparisons.
"At the moment, global fertiliser prices have been pushed up partly due to the current high price of gas in Europe, which has caused some fertiliser manufacturers to either shut down or pass on the high input costs."
"China's recent move to stop fertiliser exports until mid-2022 will further reduce the supply of fertiliser in world markets, exacerbating the upward pressure on prices, as farmers, suppliers and governments globally seek to ensure some supplies for the coming year."
The last time the world saw a fertiliser price spike similar the current one was around 2007 to 2009, which was caused by a combination of surging demand driven by record global crop prices, as well as by China imposing high tariffs of fertiliser exports. Prices took between one and two years to return to their previous levels.
Depending on the flow-on effect of these global rises to Australian fertiliser suppliers, this could see many farmers re-evaluating their plans for the next year, particularly in terms of sheep and cattle stocking rates, ANZ said.
"Sheep and cattle producers may need to re-evaluate the impact high fertiliser costs will have on their bottom line, balancing up their forecasts for sheep, cattle and grain prices, versus increased input costs. It may well be that some livestock producers will choose to reduce their stocking rates, given the potential difference in pasture growth from reduced fertiliser application.
"This could see an easing of re-stocker buying activity, which has been responsible for much of the high prices over the past two years, as livestock producers have sought to take advantage of ample grass through the good post-drought seasons, to rebuild their own herds and flocks, " Mr Whitehead said.
This could ease the price pressure for meat processors, which has seen meat prices rise at export and domestic retail levels, however it could also slightly slow the gradual rebuild of Australia's stock numbers, as they continue to recover from the drought.
"Looking further ahead, the fact that domestic fertiliser prices will increasingly be subject to heightened global volatility could see further changes in Australia. In addition to some local companies increasing their fertiliser production and storage capacity, it could also accelerate innovation in areas such as micro-application of fertilisers through agtech, as well as the development of more non-synthetic fertilisers."
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John Ellicott
journalist and author
journalist and author
