Fertiliser savings are yet to flow

Fertiliser savings from the strong Aussie dollar won’t be seen until next year, according to experts.

Ravensdown Australia general manager Alan Thomson said the high $A equated to savings of $30/tonne on the price of some fertiliser products, but the savings would not be seen until 2012.

“Given that seeding is upon us, most product should all be on hand by now,” he said.

Rabobank senior analyst Wayne Gordon said the price of urea might increase as seasonal demand for top up fertiliser picked up.

He said urea prices were going to be stuck in the $US300–350 FOB until July and then they would increase slightly thereafter.

“Global nitrogen demand will increase around July/August and as energy prices rise, urea prices will also rise,” he said.

Mr Gordon concurred that savings from the strong $A had not yet been seen in the market.

“As we move through the season, fertiliser prices will change,” he said.

“Urea prices are now on the soft side and I think we will see some recovery in prices, but I don’t think there will be the same lift that we saw in DAP prices through November until now.”

However, Mr Thomson sees a downside in the urea price.

“In terms of urea, the price peaked about $US430 two months ago,” he said.

“We are telling farmers to hang off, because we think the price is going to come down.”

Mr Thomson said while demand was firm, capacity was going to increase later this year with new production plants established in North America and the Middle East.

He said Morocco’s Office Cherifien des Phosphates, the world’s largest producer of DAP, was increasing its capacity by one million tonnes, set to come on later this year.

“When the DAP world price trebled in 2008–09 there was only a three million tonne shortage in the world, so anything that boosts the world’s fertiliser supplies by a million tonnes is going to help suppress that price increase,” he said.

“There’s also an enormous phosphate resource in Saudi Arabia which is planned to produce about two million tonnes of product,” he said.

“Although prices are going up at the moment, with at least two suppliers increasing supplies, we expect prices to stabilise and soften as a result.”

Mr Thomson said the phosphate rock price generally followed behind the DAP price.

“It’s at a discount to the DAP price at the moment, so if you are considering getting superphosphate I would do that sooner than later.

"I don’t see much opportunity for relief in potash prices, but urea will keep going down and we think DAP has peaked and should go down.”

Growers can also expect to feel the pinch as oil prices climb.

“Freight costs out of Europe cost $US60–80/t so any increased costs of ship fuel will add to that, but the high dollar will offset that,” Mr Thomson said.

Glencore fertiliser logistics manager Jeff Godfrey said current prices were the same as this time last year.

“Our granulated sulphate of ammonia is $330–335/t,” he said.

Mr Godfrey said early in the year the product was $300/t but reduced stocks and increased demand meant prices had to lift.