A recent Rabobank report highlights a complex scenario for the global fertilizer market – fertilizer costs are down, but so are commodity prices, squeezing farmers’ margins. Demand for certain fertilizers, such as phosphates, is experiencing a downturn, but the overall use of fertilizers is projected to rise in 2024, but at a reduced pace.
For Australia, the report says, an overall reduction in demand for fertiliser is expected for the upcoming season – marking a departure from the recent trend, which had seen fertiliser application rate increasing.
RaboResearch analyst Vitor Pistoia said the bank expected a total nutrient reduction of approximately seven per cent for the season ahead, driven by a decrease in nitrogen application and a similar drop in phosphate fertilisers.
“The outlook for the 2024/25 season, however, is more challenging,” Mr Pistoia said, with comparatively lower grain and oilseed prices prompting a change in crop rotation programs and lower fertiliser application.
Operating costs for farmers, especially for fertilizers, are returning to pre-Ukraine war levels, while at the same time commodity prices are falling.
This combination has led to a squeeze on operating margins, which are now below the average of the past two years, making farmers more cautious about investing in their farms.
“Despite these headwinds, the fertilizer sector is showing resilience. Geopolitical factors, among other issues, could present further obstacles, yet the growth in fertilizer use is anticipated to persist,” says Bruno Fonseca, Senior Analyst – Farm Inputs at Rabobank.
Commodity prices are falling and producers respond to lower commodity prices by adjusting operation costs.
“In response to falling commodity prices and tightening margins, producers are making strategic adjustments. By reducing crop area, they aim to realign supply with demand, even if it means operating at breakeven or negative margins,” explains Fonseca.
Nitrogen fertilizer prices are on a downward trajectory, influenced by diminished demand and falling natural gas prices.
The phosphate market experienced a price surge early in 2024 when China shifted its focus to domestic needs, curtailing global exports.
This trend reversed with China’s resumption of exports in mid-March, though it remains to be seen if this will bring stability to the market.
Potash, on the other hand, is witnessing a robust supply due to increased exports from Belarus and Russia, leading to lower prices. While potash demand is projected to remain strong in 2024, it is uncertain how farmers will react to the price reductions.
