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Global supply disruption to see Aussie growers lock in ag inputs early for season ahead – Rabobank outlook

Widespread global disruption to supply is set to see Australian farmers again move to lock in fertiliser and other inputs early for the season ahead, Rabobank says in a recently-released report.

This is despite global fertiliser prices at near-decade highs and expected to remain elevated in the short to medium term.

In its semi-annual Global Fertiliser Outlook: High prices to test demand, the agribusiness banking specialist says global fertiliser prices have reached their highest level since 2012.

And while these price highs will “test demand”, the report says, this will be in the short term, with the “global fertiliser complex” expected to remain supported due to ongoing high commodity prices.

This global backdrop is set to underpin high Australian nitrogen (urea) and phosphate prices until at “least the end of Q1 2022”, according to Rabobank’s senior agriculture analyst Wes Lefroy, driving another year of early input purchases for many Australian growers.

And the challenges aren’t just confined to fertiliser, with global supply chain disruptions also impacting agri chemicals, Mr Lefroy said.
“2022 could be one of the toughest years that retailers of agri input supplies and farmers alike have seen in recent times when it comes to acquiring inputs,” he said.

“We see the production and supply of inputs being impacted by a combination of factors including weather events, the high price for raw materials, environmental regulation and freight being heavily disrupted. Overlaid with strong local demand, this is really ratcheting up the pressure.”

Mr Lefroy said with the current season nearing conclusion, farmers were now turning their minds to the 2022 season, and in particular phosphate and other inputs, such as glyphosate, for spraying over the summer.

“With no major price relief on the horizon and freight disruption continuing, this places farmers in a very difficult position ahead of the 2022 season,” he said.

“‘Just-in-time’ purchases by farmers come with an increased risk of inputs only partially arriving or arriving late. Early purchasing, or locking in early purchases, not only ensures product availability when needed most, but also helps mitigate any further price rises.”

For growers, higher fertiliser prices have already put pressure on margins during the 2021 season, Mr Lefroy said.

“Prices of Chinese glyphosate – the source of 65 per cent of global, and a large chunk of Australian, supplies – have increased 75 per cent this year,” he said.

“In recent weeks, we have also seen a cap on the production of one of the key materials used in the production of glyphosate, which is likely to place further pressure on supply and prices.”

Freight issues

Mr Lefroy said inflated ocean-freight costs were also pushing fertiliser prices higher, adding as much as 10 per cent to a landed tonne of Australian fertiliser, with delivery times also “blowing out dramatically”.

And these bulk and container freight dynamics are unlikely to improve before the end of the year, he said.
“As such, we see supply chain disruption – along with some concerns about input prices rising even higher – prompting farmers to purchase their inputs earlier than usual again this season,” Mr Lefroy said.

“If nothing else, we consider it’s important that buyers are in close communication with their suppliers, as early as possible.”

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