Urea prices spike by $60 a tonne as Middle East conflict ramps up

Urea prices are up $60 a tonne amid Middle East tensions and rising demand. Here’s what it means for farmers ahead of winter.

Urea prices have jumped $60 a tonne in a week, driven by Middle East supply disruptions and a late surge in local demand.

The surge follows renewed geopolitical tensions after an escalation in the Israel-Iran conflict, which has rattled global fertiliser markets.

Southern Grain Storage director Campbell Brumby said the market was hinging on “unknown factors” at the moment.

“The world price for urea has risen dramatically,” he said.

“I would say there has been a US$40 a tonne rise on urea, and that is the commodity everyone is worried about.”

A week ago urea prices in Australia were at $770 a tonne. Mr Brumby said the price was now closer to $805 a tonne, with concerns that it could rise by another $40 to $50 a tonne within the next two weeks.

“At the moment I would say stock availability in Australia is okay. But as soon as you see a situation like this, there is often a run on stock,” he said.

Mr Brumby said early feedback from fertiliser importers was that there had been airstrikes on nitrogen, gas and ammonium plants in Iran. The fallout from that was likely to put more pressure on supply.

In 2022 urea prices reached record highs of $1000 a tonne due to the Russia-Ukraine conflict and export restrictions.

Mr Brumby said he didn’t think the current conflict would cause such a dramatic shift, but it was still a largely unknown situation.

“Urea is the biggest fertiliser commodity traded in the world and what we are seeing at the moment is volatility, but hopefully it will settle,” he said.

Professor Robert Brooks from the Monash Business School Department of Econometrics and Business Statistics said the conflict had led to some short-term disruptions to gas supplies from Israel and Iran. Subsequently, fertiliser production and supply had been affected.

“At present, this is short term, but there would be some risks that need to be managed if there were longer-term, more extensive disruptions,” he said.

“The conflict has disrupted supply chains and pushed oil prices higher, making them more volatile. This kind of uncertainty is particularly concerning for Australia, where we operate under an international price parity model for energy.

Rupanyup grain grower Andrew Weidemann said farmers were aware of increasing costs.

Rupanyup grain grower Andrew Weidemann said farmers were aware of increasing costs in the short term due to the conflict.

“We have seen fuel prices go up, and then settle again,” he said.

However, in terms of urea needs, he said farmers in Victoria would need to see 80mm to 100mm of rain to provide benefit from adding inputs.

“We really need big weeks of rain,” he said.

“People might hold back on buying urea due to the price going up and also the tough season.”

According to the Australian Institute of Petroleum, diesel was quoted in Melbourne at 174 cents a litre this week. It was a 0.6 per cent increase from the previous week.