A markedly better than expected start to the winter cropping growing season has led to a sudden tightening in nitrogen fertiliser supplies as farmers seek to set out on unplanned top dressing programs.
In spite of Bureau of Meteorology forecasts of a dry winter on the back of a developing El Nino event there have been heavier than anticipated winter rains in much of the southern cropping belt on both sides of the country, particularly in Victoria and South Australia.
This has led to a revision in yield potential and farmers have scurried to source urea.
However, in May when fertiliser businesses were putting in orders with international suppliers to meet winter top dressing demand there was muted grower interest due to concerns about the dry and the falling price of urea, meaning there is local supply than usual.
With a lengthy lag time between placing orders and the fertiliser arriving in Australia, especially with key Asian production facilities offline for maintenance there is little chance of significant volumes hitting Australian shores in the time frame to allow the fertiliser to be spread within the optimum application window.
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Fertilizer Australia executive manager Stephen Annells said the shortage had been caused by a "perfect storm" of factors.
"It has been very unusual, we have had unexpected demand after better than expected winter rain, we've got the falling global urea price and then the lowering of production, all three factors have combined to cause this shortage," he said.
"Unfortunately these situations, where people, both producers and suppliers, have followed their best business practices and still found themselves with an issue can happen when you see these vagaries in climate, especially after such a strong forecast for dry had everyone predicting markedly less urea usage."
He said growers and suppliers needed to work together to come up with strategies to allow them to remain nimble when supply and demand dynamics rapidly changed.
"Obviously more government support for local urea manufacturing would really help in cutting out the lag, but the closer both sectors work together the better in ensuring needs are communicated."
"Suppliers are not comfortable taking massive forward positions given the volatility of the market and the risk of being stranded with expensive product, so we'd invite the growers to think of ways to help share the risk."
He said there was talk of moving fertiliser north from Brisbane, which services areas that are drier and with less demand for urea, back down to southern areas, but said this would add significantly to the landed cost for growers.
Shane Dellavedova, Dellavedova Fertiliser Services, Maryborough, Victoria, said the shortage of urea was caused by an unusual combination of factors, including the turnaround from dry to wet conditions and a lack of forward purchases due to a falling market.
He also said supply disruptions at Asian urea manufacturing facilities had exacerbated the impact.
"The facilities all have annual downtime for maintenance, given there were not many orders coming in from Australia two of the four major producers have scheduled maintenance now, which means it is harder to get product that can arrive in Australia quickly to meet the current shortfall."
He said industry sentiment was that most of the nitrogen fertiliser set to arrive in Australia over the next eight weeks was likely to be already committed.
"We've really seen a big turnaround in terms of demand over the last two weeks as the rain has seen growers more confident about going out and top-dressing more nitrogen."
He said there was some industry speculation that some of the shortfall in supply could be made up by product from the drier northern cropping zone, where demand is lower, or even Western Australia.
"There is talk of urea potentially moving from Brisbane or WA to meet demand in our part of the world."
"At this stage for farmers it is more about availability than cost and they may be willing to pay more just to get their hands on the product when they need it."
Australia's major fertiliser retailer Incitec Pivot said it was working to ensure there was adequate urea supply.
"Incitec Pivot Fertilisers (IPF) has been, and will continue to, procure urea from several large, reputable producers across a number of regions to ensure continuity of supply for its customers," a company spokesperson said.
The spokesperson said the company was also looking to create a more robust supply chain for the industry into the future, featuring more local product.
"IPF has secured a long term supply of urea for its customers via a 20-year offtake partnership with Perdaman Chemicals and Fertilisers," the spokesperson said.
"The urea will be produced in Karratha, Western Australia, at Perdaman's $6 billion urea project and will provide IPF with up to 2.3 million tonnes per annum of urea, with supply expected to be available from mid-2027."
"This extends IPF's Australian supply of fertiliser from its existing ammonium phosphate plant in Queensland and its Single Super Phosphate plant in Victoria."