High grain prices keep fert in demand

High grain prices mean some demand for fertiliser this year

Cropping News
Fertiliser is unlikely to be difficult to source this year in spite of interruptions to production at Incitec Pivot's Phosphate Hill facility in Queensland.

Fertiliser is unlikely to be difficult to source this year in spite of interruptions to production at Incitec Pivot's Phosphate Hill facility in Queensland.

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IT WILL not be a bumper year for fertiliser sales, but there will still be reasonable volumes put out due to high grain prices.

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THE FERTILISER industry is gearing up for a short and sharp period of peak demand for product this year, with farmers likely to be able to obtain sufficient supplies in spite of production issues caused by flooding in northern Queensland.

Incitec Pivot announced there would be production cuts at its Phosphate Hill facility due to flooding cutting the rail line between the production plant and Townsville.

However, it is unlikely to have a major influence on fertiliser supply and demand or pricing.

Shane Dellavedova, Dellavedova Fertiliser Services, based in Maryborough, Victoria, said the fertiliser retail sector was expecting a mixed bag this year in terms where the demand would be.

"Obviously in the north the results were very poor, but there were good yields in the far south so it will definitely be business as usual for them," Mr Dellavedova said.

Even for those who recorded poor results he said the high grain and fodder prices may act as an incentive to stick to normal fertiliser application rates.

"It's not going to be above average but I don't think it will quite be as depressed as it can be in some years.

"The export hay job, in particular, is providing some confidence to the market."

The other factor that may see slightly more fertiliser go out than some are expecting is that so many paddocks planned for grain were cut for hay due to the dry spring.

This means more nutrition has been taken out and that more fertiliser is required.

In spite of these points Mr Dellavedova said he was not expecting a long season.

"We are gearing up for a later start to the application season, but we expect it to be very busy through March / April, it will be short and sharp we think."

He said globally fertiliser prices were still generally on a downward spiral.

"In particular, nitrogen is still coming back."

At present, Australian prices are around $700-750 a tonne for phosphorus based products such as DAP and MAP, and $550/t for nitrogen-based urea, with markets on the decline.

"There has not been a rush of people locking in fertiliser contracts and the way the market is going it does not look like you would need to, with it gradually dropping at present."

"The other key reason for putting in orders is to guarantee supply when you need it and again there is no urgency, there seems to be plenty around."

This is in spite of Incitec Pivot confirming interruptions to its business because of the closure of the rail line between Townsville and its Phosphate Hill facility as a consequence of the once in a 100-year rain event and the resultant flooding in northern Queensland.

The Phosphate Hill facility is currently undergoing a progressive shutdown as IPL waits for confirmation as to when the rail line can open once again.

The site, located 1000 kilometres west of Townsville, manufactures ammonium phosphate based fertilisers, with annual production capacity of 975,000 tonnes.

IPL currently estimates that the impact of the rail closure will give rise to lost earnings of approximately A$10m per week from 9 February 2019 until the resumption of full production, however the facility itself at Phosphate Hill is not damaged.

The localised impacts of the closure are not the only thing that may put some upward pressure on the market, if global fertiliser giant Yara is to be believed.

Yara said in an update last week it expected nitrogen supply growth to decline and for demand to pick up on the back of increased grain production, required to keep up with global consumption patterns.

The company said worldwide grain stocks were relatively low, especially in the key Chinese market.

Meanwhile, Mr Dellavedova said at present farmers' focus was on soil ameliorants such as lime and gypsum.

"There is a fair bit of lime and gypsum going out at present, we'll start to see people looking at their phosphorus programs in March."

The story High grain prices keep fert in demand first appeared on Farm Online.

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