Grain Producers Australia’s State Policy Managers met last week to discuss sharp increases in fertiliser prices and consider the impact this is having on Australian grain producers; especially short-term decision-making for planting next year’s crop.
This meeting included presentations on the current situation by Fertilizer Australia, Executive Manager, Stephen Annells, and Thomas Elder Markets, Market Analyst, Andrew Whitelaw.
In addition, GPA wrote to Federal Minister for Agriculture and Northern Australia, David Littleproud, in September expressing concerns about high fertiliser prices, including analysis showing global urea prices had increased between 60 to 70 per cent this year while DAP had increased by up to 75pc.
This correspondence urged the Australian Government to support and invest more in local manufacturing options to help secure more local supply – and to also provide this support for other essential farm inputs, such as chemicals and the raw ingredients needed to make products.
In late October, GPA followed up these calls by holding a Green Fertiliser Industry Roundtable involving Senior Federal MPs and Ministers, and representatives of the Australian grains and fertiliser industry.
The Roundtable was co-hosted by Grain Producers Australia and Strike Energy, who are developing a plant at Geraldton in Western Australia’s Northern Wheatbelt, that’s aiming to produce and utilise Green Hydrogen to manufacture a greener urea product through an onsite 10MW electrolyser.
This forum highlighted the advantages of using modern technologies to increase domestic manufacturing and expand local supply of cheaper, cleaner fertiliser products such as urea to help boost the sustainability and profitability of Australian farmers.
At the GPA Policy Manager’s meeting last week, the longer-term benefits of the Strike Energy facility were noted, and other options such as the Leigh Creek Energy fertiliser project in South Australia that’s aiming to produce 1 million tonnes of carbon neutral urea annually from 2024.
Increasing local supply of fertilisers and other farm inputs also benefits Australian producers by reducing biosecurity risks, because less product is needed to be imported from overseas.
But while fertiliser prices are front of mind for growers – along with the significant impact of rain and storms on harvest and crop quality and returns – the short-term solutions are limited; apart from highlighting/reinforcing key messaging to growers, to improve awareness and understanding.
GPA will continue advocating the need for government support for local manufacturing, with facilities such as Strike Energy and Leigh Creek Energy; to boost local fertiliser supply, reduce emissions and build stronger rural communities and economies, with local employment creation.
GPA State Members will also share messaging with growers through their networks about the current situation, such as Fertilizer Australia’s statement (below) which highlights the importance of planning ahead and expressing current confidence in there being sufficient supply. This statement also supports growers obtaining independent advice from accredited agents, such as on soil testing, to help them make informed commercial decisions, relevant to their individual circumstances.
Information and background also worth noting and sharing with members includes Fertilizer Australia’s report, ‘The Australian Fertilizer Industry Review 2021’. This paper is intended to give media organisations, policy makers and other interested parties an understanding of the Australian fertiliser industry and the interaction with the global industry and international markets.
GPA State Policy Managers have also discussed the relevance of a 2009 report on an inquiry by the Federal Parliament’s Select Committee on Agricultural and Related Industries, ‘Pricing and supply arrangements in the Australian and global fertiliser market’.
That inquiry resulted from a similar scenario with a dramatic increase in domestic fertiliser prices in 2007 and 2008, reported to be 100pc or more – where increased grain prices globally had also led to increased crop plantings and therefore increased demand for fertiliser.
The report’s Recommendations (below) are also on this Communiqué while the full report is available here along with the Government’s response to this inquiry, which was tabled in 2013.
At this time, in February 2008, then then Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, the Hon. Chris Bowen MP, wrote to the Australian Competition and Consumer Commission requesting it to undertake an examination of fertiliser prices, particularly the reasons for recent dramatic increases in prices.
This ACCC’s conclusions are included on this Communiqué (below) with the full report on this analysis available here.
It should be noted the ACCC’s inquiry had no formal information-gathering powers and instead relied on the cooperation and assistance of interested parties, including suppliers of fertilisers,
industry associations and representative bodies of end user groups.
Fertilizer Australia’s current statement (5 November 2021)
The global fertiliser market is experiencing strong demand combined with high global energy prices and increased cost of raw materials, shipping and logistics.
This high demand is driven by high global prices for agricultural commodities. Australia’s fertiliser is sourced from many international markets and is not dependent on one supplier nation, in addition a portion of domestically manufactured product.
While there is significant volatility and uncertainty, Fertilizer Australia member companies are actively working and currently confident that there’ll be sufficient supply of fertiliser to match the seasonal demand cycle. Growers should not panic but plan ahead.
With the current high prices, it is critical that growers optimise their fertiliser purchases by ensuring they do soil tests and get advice from a Fertcare Accredited Advisor.
Fertcare is a training and certification scheme that ensures the sustainable and efficient use of fertiliser. encourages fertiliser use efficiency and sustainability through soil and tissue tests and good agronomic advice.
The “4R” principles, the right type of fertiliser, applied at the right volume, at the right time and in the right place can assist in efficient use of fertiliser and optimisation of yields.
Fertilizer Australia encourages growers to seek out Fertcare Accredited Advisors, who can provide sound and efficient nutrient use advice. More information on Fertcare and Fertilizer Australia can be found at fertilizer.org.au
While Fertilizer Australia does not make comment on supply issues and pricing the current situation needs to be clarified considering some statements that have caused some consternation and confusion among the end users of fertiliser.
Market Overview By Thomas Elder Markets
• Urea and DAP is pricing into Australia at approximately A$1300
• Energy costs (coal and gas) is the main driver of pricing of fertilisers
• Coal pricing in China has fallen considerably during November, and crude oil prices has stabilised.
• A new Urea plant in Brunei has received approval to import Urea into Australia. This plant will be operational during December. They will produce approx. 1.2mmt
• Fertiliser prices are likely to remain at elevated prices through until seeding.
Recommendations from Inquiry by Select Committee on Agricultural and Related Industries
3.34 The committee recommends that the states and territories should consider, as a matter of priority, adopting uniform description and labelling of fertiliser products to ensure consistency between jurisdictions.
3.35 The committee recommends that all state and territory agriculture departments should consider undertaking regular sample testing for specified ingredient levels, such as nitrogen/phosphorus/potassium (NPK) levels, in fertiliser products.
3.73 The committee recommends that the Commonwealth review Part IV of the Trade Practices Act 1974 relating to restrictive trade practices with a view to amending these provisions of the Act so as to more effectively regulate anticompetitive practices and prevent abuse of market power.
3.84 The committee recommends that ABARE: collect and publish international input price information on fertiliser products on a regular basis on its website; and disseminate this information widely to farmers through the ABARE website, farmers' organisations, the rural press and other appropriate avenues.
3.102 The committee recommends that in the interests of transparency the industry improve its business practices to ensure that fertiliser companies: publish general information, including arrival of shipments, detailing the amount of fertiliser available in stock; and provide greater certainty in the filling of orders, especially orders for fertiliser products placed earlier in the season.
3.103 The committee recommends that, wherever possible, supply agreements between suppliers and customers be more structured and equitable, and, where appropriate, include standard contractual terms and conditions.
ACCC Inquiry’s Conclusions
The ACCC was asked to examine the fertiliser industry and, in particular, consider the reasons behind the significant recent increases in fertiliser prices in Australia.
The significant rises in fertiliser prices in Australia are mainly attributable to rapidly increasing global fertiliser prices. These increases have been caused by a substantial increase in world demand for fertilisers associated with an expansion in agricultural production (particularly grains for food, feed for livestock and bio-fuels) and by rises in costs of production associated with the increasing cost of energy. This is occurring in a market where the global supply capacity is limited in the short-to-medium term.
A number of interested parties who made submissions to the ACCC as part of this inquiry raised concerns about the way in which fertiliser markets in Australia operated during the period from late 2007 to early 2008. Much of the conduct that raised concerns was caused by a situation of deficiency in short-term supply associated with an unexpected bringing forward of demand by end users in the context of rapidly increasing world prices.
The ACCC is satisfied that it received sufficient information from interested parties in the form of comprehensive submissions dealing with the subject matter of this inquiry to meet the minister’s request. The ACCC has not been provided with any evidence suggesting a likely breach of the Trade Practices Act by any participant in the Australian fertiliser industry.