Farm fertiliser “affordability” is starting to improve across the globe, with a likely recovery in application in some regions in 2023, Rabobank says in a recently-released report. However, in most cases, demand will take some time to return to pre-pandemic levels.
In its Semi-annual Fertiliser Outlook, the global agribusiness banking specialist says most fertiliser prices are gradually returning to their historical averages, after skyrocketing over the past two years due to the impacts of Covid-19 and the Russia-Ukraine war.
The report, titled Improved Affordability Ahead, says global fertiliser prices had begun to trend higher in 2021 due to supply chain constraints resulting from the Covid-19 pandemic.
Affordability deteriorated further when fertiliser prices set new record-high levels after Russia invaded Ukraine, reducing supply from the region and also resulting in higher production costs.
By that time, Rabobank analyst Vitor Pistoia said, “reasonable prices for agricultural commodities were the only reason fertiliser didn’t become as unaffordable as it was in 2009 during the global economic crisis”.
Prices continue to remain above average for a number of agricultural commodities, due to tighter stocks, he said.
“The combination of still-positive commodity prices and lower fertiliser prices is helping fertiliser affordability for farmers. Although globally, ‘consumption’ may take two or three years to recover, and the speed of recovery will depend on how long the current positive cycle lasts,” Mr Pistoia said.
For Australia, the Rabobank report says, in recent years, fertiliser demand had grown despite the price hikes, as the country enjoyed good seasonal conditions and a surge in grain and oilseed production.
“Every year since 2020, G&O (grain and oilseeds) yields have exceeded the previous year’s production, with 2022 winter and summer crop seasons combined reaching an historically high 72 million metric tonnes, a 130 per cent surge. At the same time, cropping area increased 27 per cent from roughly 20 million hectares to 25.5 million hectares,” the report said.
Mr Pistoia said good weather driven by La Nina and investments in crop management had underpinned this “phenomenal growth”.
Apparent fertiliser demand in the same period moved from 5.4 million to around 6.6 million metric tonnes, a 21 per cent increase, according to the report.
“Although the conditions for the 2023 crop seasons are a bit different, they do not signal a reversal in the trend of historically-high cropping area and a significant application rate,” Mr Pistoia said.
“The drop in farm input prices is greater than that of commodity prices, and this is slowly improving farmers’ buying power.”
Denise Shaw Will Banks
Media Relations Media Relations
Rabobank Australia & New Zealand Rabobank Australia
Phone: 02 8115 2744 or 0439 603 525 Phone: 0418 216 103
Rabobank Australia & New Zealand Group is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 38 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 90 branches throughout Australia and New Zealand.