Fertilizer Prices Continue to Rise

The Executive Manager of the Fertilizer Industry Federation of Australia (FIFA), Nick Drew, says that he understands that the high fertilizer prices for the coming season might be difficult for farmers to manage. “There is no doubt that current fertilizer prices are viewed as bad news by primary producers, many of whom are still dealing with the effects of drought,” Mr Drew said. “Fortunately there is a silver lining as the same factors that are causing fertilizer prices to rise are increasing the prices farmers receive for commodities,” he added.

“Australian fertilizer companies operate in a highly competitive domestic market and major fertilizer products are traded on a competitive world market – this means that global changes in prices are quickly reflected in Australia,” Mr Drew explained.

Import and export prices are determined by world markets and therefore subject to the pressures of supply and demand.  Rising demand for food, from China and India in particular, has been the largest factor influencing global demand for fertilizers – and this has been compounded by demand for crops as an input to bio-fuel manufacture.

The result is that current demand for fertilizer exceeds supply, leading to steep increases in price and delays in sourcing additional tonnage.

“The bright side to the story is that the same factors that are pushing fertilizer prices higher are also increasing the prices farmers will receive for most commodities. As an example the AWB Number 1 pool price for APW wheat has increased by 84% for the 2007-8 year compared with the 2006-7 year,” Mr Drew said.

“The scale of recent price increases has been dramatic. For example, the price for a tonne of diammonium phosphate (DAP) from the USA increased by 160% between January 2007 and January 2008. For the same period, the price of urea from the Middle East increased by 53%. On top of the purchase price, Australian suppliers must meet the significant costs of sea freight, port charges, storage, handling and distribution before arriving at a sale price to the farmer,” Mr Drew explained.

“Sea freight is a significant component of fertilizer prices and the high demand for bulk sea freight associated with the commodities boom has seen an increase in international shipping rates of nearly 200% since December 2006,” Mr Drew said.

Some of the other significant influences on fertilizer prices are:

·       the price of fossil fuels, particularly gas for the production of nitrogen fertilizers; and,

·       the foreign exchange rate, where a decrease in the value of the Australian dollar increases the domestic price and vice versa (all other factors being equal).

While the high prices of fertilizers are unavoidable, farmers know that they are an essential requirement of successful farming in Australia. Farmers are encouraged to do what they can to ensure the fertilizer they do buy is used as efficiently as possible.

“The Australian fertilizer industry has developed a product stewardship program called Fertcare, which aims to assist farmers in efficient fertilizer use”, Mr Drew explained. “While the primary driver of Fertcare has been environment protection, there are obvious financial benefits from efficient fertilizer use.”

Mr Drew urges farmers to seek advice from Fertcare accredited businesses to help them achieve these dual outcomes. Soil and plant testing are two critical tools for determining optimum fertilizer application rates, and good advice about application strategies can make a large difference to the efficient use of the fertilizer applied.

“Unfortunately, all indicators suggest that the high cost of fertilizers will continue for some time now, so the need for efficient fertilizer use has never been more pressing”, Mr Drew concluded.

End

Background

FIFA is an industry association primarily involved in public policy development and implementation on behalf of its member companies. FIFA works with all levels of Government in Australia on issues such as food safety, environment, quarantine and security where fertilizers can have an impact. FIFA member companies are responsible for more than 95% of the fertilizer manufactured, imported and sold in Australia.

Around 50% of the 5 to 6 million tonnes of fertilizer used in Australia each year is manufactured in Australia with the balance imported from a variety of overseas countries. Super phosphate, manufactured from imported phosphate rock makes up 50% of the domestically manufactured product sold in Australia.

In addition to domestic use, Australia exports between 200,000 and 400,000 tonnes of fertilizer each year, primarily from Incitec Pivot Limited’s ammonium phosphate plant in North Queensland.

Further Information

Nick Drew – Executive Manger FIFA:     (02) 6230 6987

International Fertilizer Prices www.fertilizer-index.com

AWB Wheat Pool Prices www.awb.com.au

FIFA www.fifa.asn.au

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