Given Australia’s reliance on fertiliser imports, rising prices have been a key setback for farmers following the decline in the Australian dollar over the past five months.

Within this time frame, RaboResearch commodities and farm inputs analyst Paul Joules said the Australian dollar has declined by 8% (despite a partial recovery which began in mid-January). “Partially as a result of this, urea, phosphate and potash prices, when converted into AUD terms, have all made strong gains over the past 12 months – urea up 18.3% year-on-year, with phosphate and potash up 9.8% and 10% respectively,” he said.

Despite a recent drop in the USD, which has subsequently supported AUD prices, RaboResearch still anticipates the AUD/USD cross to fall to around USD 0.61 on a 12-month view. “Assuming we continue to see Australian dollar weakness over the next year, this means downside (the potential for lower prices) will likely be capped for importers amid the ongoing currency headwind,” Mr Joules said.

Currency aside, the agribusiness banking specialist expects the other key driver for fertiliser prices is global supply and demand.

“Urea prices have increased the most over the past year, and another aspect of this rally is ongoing supply issues,” Mr Joules said. “Given the preferred feedstock of urea production is natural gas – a volatile commodity – this volatility translates through to urea prices.”

RaboResearch expects the three benchmark natural gas contracts to remain elevated – in Europe (TTF), the US (Henry Hub) and Asia (JKM) – which likely limits downside potential for prices.

Mr Joules said Iran and Egypt are key urea producers currently experiencing natural gas shortages – as both countries struggle to keep up with demand from households and industry.

“Meanwhile, Europe’s fertiliser cost of production is not just impacted by high gas prices – EU legislation which relates to phasing out free carbon allowances will also soon play a role (with the phase out scheduled to begin in 2026),” he said. “Effectively, this means producers will have to pay for the right to emit carbon dioxide, and RaboResearch estimates this regulation could push European urea prices up by 45%, likely resulting in the European Bloc losing its urea export market, as buyers switch to lower-cost suppliers.”

The other key element of the supply picture is China, Mr Joules said, which, since the beginning of 2024, has dramatically reduced its fertiliser exports in a move to reduce domestic prices. “The unknown is when China will return to the fertiliser export market. A return would help loosen up a tight global supply and demand matrix, however a continuation of very limited Chinese exports could further exacerbate the tight market.”

Mr Joules said clearly, there are several supply issues impacting fertiliser markets, and for many of these suppliers, it’s unclear when they will be resolved. “The other side of the coin is demand, and typically the world’s largest fertiliser buyers tend to have the strongest influence on markets. The world’s largest urea importer, India, has been garnering attention amid speculation about when it will re-enter the global market in search of further volumes. Given urea stock levels are lower than the same time last year, and domestic production is also down in February on a year-on-year basis – import volume could be strong, which may also support prices.”

Ultimately, Mr Joules said prices for all imported fertilisers are being impacted by the recent Australian dollar decline. “However, urea markets appear to be the most volatile. The market will be carefully assessing ongoing supply issues and any changes in the global supply and demand outlook in 2025,” he said.

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