Arable Farmers Shift to Dairy as Fuel and Fertiliser Costs Surge
Some arable farmers are getting out of arable and converting to dairy in the faced of soaring fuel and fertiliser prices on top of a very poor growing season.
“What we’ve seen from a fertiliser price point of view is that nothing has gone down,” says the cooperative’s supply chain general manager, Mike Witty. “It all comes down to supply and demand.”
Prices of ammonia, a key ingredient, actually rose 40% to peak at the end of last year and while they have started to ease, Witty predicts it will only be to where values were a year ago.
The reason is gas supply is “decoupled” from oil and the Middle East, where much of the world’s fertiliser is made, “always has cheap gas” so the low oil price makes little difference, Witty explains.
Other factors are the unrest in Ukraine which has limited its urea output, and continued high demand from India where nitrogen fertiliser is subsidised to encourage food production.
Urea prices have eased from a peak of over US$400/t FOB China to US$320-340/t but the NZ dollar’s 15% drop against the greenback has more or less wiped that out so with shipping, distribution, rebates and overhead costs there’s no room to cut Ravensdown’s current ex-store list price of NZ$580/t, says Witty.
However, Ravensdown’s policy is always to be competitive so if rival Ballance Agri-Nutrtients cut its prices, so would Ravensdown, he adds.
Sulphur supplies, another key component of products such as DAP, ammonium sulphate and superphosphate, are also tight, so Witty says he doesn’t see any likelihood of the price of super dropping.
Demand in New Zealand has been “pretty steady” despite the South Island dry, he says, but the lower dairy payout forecast means he expects “a bit of a pull back” on autumn capital fertiliser applications from that sector.
“They tend to reduce potash and phosphate inputs but nitrogen’s seen as the most economic way to produce extra feed if required.”
Consequently, he says he doesn’t expect demand for urea to drop much, unless the dry reaches the point where farms have to destock.
Potash prices have come off their peak and are now at their lowest levels since before 2008 but with some production issues emerging – a flooded mine in Russia and extreme cold in Canada causing logistical difficulties – Witty says he doesn’t expect them to ease further.
“The supply of granular potash has been very tight. Prices will probably flat line.”
