It is clear that the period of plentiful rainfall is over ‘Down Under’ said Rabobank farm inputs analyst Vitor Pistoia. “And throughout the bush, we have a whole range of crop and pasture conditions,” he said.

Mr Pistoia said there is still time for improvement, or even deterioration, of paddocks, but some elements are already consolidated and will set the tone for fertiliser demand in the coming season.

“The bigger picture is positive – basically because fertiliser prices have come down massively since mid 2022 and because recent past seasons have been good in terms of performance,” he said. “So, there has been reasonable cash flow across a broad range of enterprises. Compared to the peak of 2022, the global references (prices) for nitrogen, phosphate and potash dropped 50 per cent, 46 per cent and 59 per cent respectively.”

However, Mr Pistoia said, there are potential headwinds ahead.

“The most significant is how close to average crop yields will be for the harvest that is about to start. If yields are lower or crops fail, this can counteract the improved price structure for fertilisers.”

The Rabobank analyst said another headwind is the Australian dollar. “Since January this year, the AUD has dropped from USD 0.68 to 0.645, a 5.2 per cent decline. In combination with the early September surge in petroleum prices, breaching the USD 88/barrel resistance mark, this is putting pressure on farming budgets already stressed from labour and cash rate rises,” he said.

Mr Pistoia said terminal-gate diesel prices now range from AUD 2 to AUD 2.1 per litre on the eastern coast, 7.5 per cent up from early in the year. “This is due to supply cuts from the bigger petroleum exporters, but also because of refinery shutdowns.  And on the energy side, the forecast is grim for buyers,” he said. Rabobank forecasts that Brent oil should remain above USD 90/barrel during 2024.

Despite these elements, Mr Pistoia said the forecast is positive for both fertiliser prices and demand in Australia.

“The bulk of local fertiliser demand occurs from late December to late April, so Australian importers should procure in advance of that period, whether supplies come from close producers, such as Malaysia, or more distant, such as the Middle East.

“Depending on the type and origin of the product, the lead time can be up to four months. So, the key question is – what is the global price forecast for fertiliser from October until February of next year?” he said.

Mr Pistoia said, “For December 2023, in AUD dollar terms, we are forecasting global prices of urea from the Middle East to be down 22 per cent year on year (YOY), DAP from Morocco down 30 per cent and potash from Canada down 38 per cent”.

“Fertiliser demand is not only driven by price but also by farmers’ revenue expectations and soil nutrient requirements.

“The grain and oilseeds sector currently has firm to good prices,” he said. “Lentils, for example, are close to AUD 1,000/tonne. The sugarcane industry has record-high global prices and Australian dairy prices are holding up well compared to beef and lamb.”

Mr Pistoia said the balance of head and tailwinds will definitely favour higher application rates for the coming season.

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