Market Morsel: Fertilizer update November

Grain | 4th December 2020 | By Andrew Whitelaw

Market Morsel

Fertilizer has been an area which I have taken an interest in over recent years. Fertilizer is a vital input cost for Australian farmers, and it is important to shine a light on pricing to assist in making purchasing decisions.

The stage which we have worked on is an insight into the theoretical landed price of DAP and urea into Australia, as these are the two most commonly used fertilizers by broadacre farmers.

The charts below show the average cost of fertilizer at the origin, plus the average monthly price of freight to Australia converted to A$. The sources are Saudi Arabia for urea, and China for DAP. These are where the bulk of Australian fertilizers originate.

These charts provide an insight into the trend of the fertilizer market. There may be a level of variability between these charts and the price quoted at a local level. These include additional local logistics, administration and retailing costs.

The theoretical DAP price landed Australia is A$523 for November, which is A$48 higher than last year. In late 2019 year, DAP prices fell to decade lows allowing purchasing at low levels in the lead to the seeding period.

This season supply and demand is tighter on DAP, and prices are expected to rise, albeit remaining relatively low compared to historical values.

The theoretical urea price landed Australia has averaged A$399 for November, A$22 higher than last year. The start of this year saw the price of hydrocarbons drop, which as the feedstock for urea caused a sharp fall in prices. The recovery in these commodities has flowed through to an increase for the last half of the year.

Forecasts by CRU expect an increase in pricing of urea in the first quarter of 2021, with prices then coming under pressure from April onwards. A large supply of urea will come online during 2021, which will maintain downward pressure on urea for quite some time.

This week Chris Lawson had a chat with Matt and I, on our personal podcast ‘Ag Watchers’ about the state of the fertilizer industry.

Tags

  • Fertilizer