As the majority of paddocks have now been sown and the bulk of farm inputs have been purchased – the cost structures for the 2023/24 crop are looking very different from the last season – especially for fertiliser.

“But what about the macro figures,” Rabobank analyst Vitor Pistoia said. “How much have the price hikes from last year prompted Australian farmers to cut application rates, and can it bounce back now? Based on preliminary data the message is quite clear – a lot and very likely.”

Looking at the year-on-year numbers, Mr Pistoia said, Australian paddocks in 2022 received 20.5 per cent less fertiliser application than the previous year, 6.32 million tonnes versus 7.94 million tonnes for 2021. “It is important to note that fertiliser application in 2021 was particularly high – well above average,” he said.

“In 2021 fertiliser application rates grew by 29.2 per cent compared to the previous year, and at the same time, the winter cropping area shrank by three per cent. Evidence of how optimistic grain growers were feeling at the time,” he said.

Mr Pistoia said looking at the current applications, on a nutrient basis, 2022 saw phosphate leading the way with a 36 per cent decline, followed by potash and sulphur with a drop of 25 per cent. “Nitrogen is the one input that did not suffer as much, posing an 14 per cent reduction. In the same period the Australian winter crop area, a good proxy for fertiliser demand, was reduced by 3.2 per cent, from 24.2 million hectares in 2021 to 23.4 million hectares in 2022.”

The Rabobank analyst said the Black Sea conflict was a major factor in driving the price hikes that began in late 2021. “And farmers decided to use the “application investments” from previous seasons, which some call “soil mining”, to carry them over. However, this strategy of relying on previous year’s applications is a short-term solution, and fortunately for farmers, fertiliser affordability is see-sawing back in their favour allowing them to feed the soil a bit more this year,” he said.

Mr Pistoia said based on the forecasts for growth in the recently released Rabobank Winter Crop Outlook report, it will not be surprising that the Australian demand for fertiliser is expected to increase by two per cent or more, putting the overall demand at the 6.5 million tonnes mark. He said this is a good indication that application rates will rebuild, as the cropping area increase is expected to be only 0.3 per cent.

However, Mr Pistoia said the “soil mining” strategy might continue for particular inputs, such as phosphate, which remains one of the most costly nutrients for farmers, with its expected applications rate growing by only 0.8 per cent. “Curiously, liquid fertiliser increased its share from 14.4 to 15.1 per cent in total demand and a similar trend is expected to take place again for the 2023/24 season,” he said.

The first half of 2023/24 saw successive fertiliser price reductions locally and especially globally, Mr Pistoia said. “Further price and supply structure modifications should reach Oceania and sustain the affordability gains in the coming months, despite the corrections farming outputs are exhibiting as well. Since January of 2023, the nitrogen, phosphate and potash global references saw 35 per cent, 33 per cent and 40 per cent in price reductions respectively.”

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