Urea prices: Rates of $650/tonne are expected to rise

Unexpected rain and low fertiliser prices are driving demand for urea. But experts say the price dip won’t last long. Here’s why.

Urea prices have fallen to about $650/tonne on farm, but experts say those prices won’t last. Source: iStock / Getty Images

Farmers hoping to capitalise on the unexpectedly wet start to the cropping season are waiting for backlogged orders of urea to arrive in the country.

Canola and wheat farmer Lawrence Balcomb said the season was shaping up to be “fantastic” on his property in Central West NSW, with early sown canola and grazing wheat thriving after heavy rain in March and April.

Last month he decided it was a “good bet to throw more (nitrogen) out” after early season rain increased his chances of achieving high yields, and put in an order with his local supplier for extra urea.

But he was told the fertiliser would arrive at the end of July at the earliest, as suppliers waited for shipments of the commodity to arrive in the country.

When he called a week later to increase his order, he was told he may not even get the amount he had originally requested due to high demand and limited supply.

“We were warned at a pre-season meeting at the end of March, (suppliers) weren’t ordering in more (urea) until their sheds were empty,” he said.

But with a dry season forecast, “people weren’t committing to taking it on farm”.

Mr Balcomb’s need for more nitrogen became even clearer this week when he received the results of soil testing on his property, showing three years of above-average yields had depleted the nitrogen supply in his soil.

“Last year, (urea) was so expensive. At $1400 a tonne, we weren’t keen to throw an extra 100kg (a hectare) out,” he said.

Now, with urea prices hovering around $650/tonne, the investment was looking more economical.

But farmers have been cautioned current prices may not stay where they are for long.

Rabobank agricultural commodities analyst Vitor Caçula Pistóia said international urea prices had been on a downward trajectory since the end of last year, but he expected them now to stabilise before rising again.

“We are likely to have minimum, if any, further reduction in price,” he said.

Following Russia’s invasion of Ukraine, Australia now looked to Europe to supply its nitrogenous fertilisers. But due to limited supplies and high prices of natural gas, between 20 and 30 per cent of urea manufacturing plants in Europe had been mothballed, Mr Caçula Pistóia said.

And on October 1, gas production from Europe’s largest natural gas field, the Groningen field, would be shut down after extraction triggered earthquakes in 2018.

This could have the effect of further throttling gas supplies and driving up prices, he said.

Australia has no domestic supply of urea after Incitec Pivot’s Gibson Island manufacturing plant closed in December. The planned Perdaman urea plant in Western Australia will not start production until 2027.