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Fertiliser price lull window

A lull in global fertiliser prices could give farmers a timely chance to lock in purchasing commitments for the coming cropping season at relatively competitive rates. Phosphate products are currently about $70 to $100 a tonne cheaper at Australian ports than a year ago and overseas prices may drop further before March say industry analysts. The subdued market also gives farmers and rural retailers an opportunity to get used to more rigid buying agreements emerging in the local fertiliser sector. Importers and distributors are urging buyers to lock in early purchase commitments and avoid the risk of copping a late blowout in demand and prices. Firm priced contracts between bulk suppliers and retailers, and farm input suppliers and their customers, will be widely adopted this year after industry organisations agreed a safety net had to be introduced to cut the risk of farmers being caught without enough product, or suppliers with too much. “I’m encouraging our customers to at least put their hands up for a third of their likely fertiliser needs now so we can lock in our own guaranteed orders with the fertiliser companies,” said Central Victorian retailer and Australian Fertiliser Services Association president, Wes Wheelhouse. “Ever since the GFC caught the big guys with expensive surplus inventory – and a lot of smaller distributors, too – nobody wants to carry any extra stock through a season. “It’s too expensive and risky.” Although hot and dry spring and summer weather has undermined cropping and pasture fertiliser demand across many Australian farming regions, the volatile world market for phosphate and nitrogen products is not tipped to stay subdued for more than a few months. Rabobank’s global farm inputs strategist Dirk Jan Kennes said agricultural markets faced the challenge of rebuilding global food commodity stocks in the season ahead. “Given the precariously balanced fundamentals, global agri commodity prices are expected to remain at elevated levels in 2013,” said London-based Mr Kennes. However, a general fertiliser oversupply around the world, especially for phosphate and potash lines, had emerged late last year and was likely to continue through the first quarter of 2013. With European farmers “very cautious” about locking in fertiliser purchases far in advance of the application season in the current economically stressed climate, fertiliser prices could dip further before April. Urea was the exception, particularly if US corn plantings take off. “In the short term, at least, global buyers will continue to defer purchases in anticipation of lower prices given that short term requirements are covered,” Mr Kennes said. Fertiliser chief operating officer with leading manufacturer and importer Incitec Pivot, James Whiteside agreed prices appeared to be close to the bottom of the cycle by recent standards and “not particularly risky” for growers at the moment. Global index prices for diammonium phosphate (DAP) from Tampa in the US are currently down to about $US500 a tonne while the world urea market’s Arab gulf exports benchmark dipped slightly to around $US420/t this month. This translates to near $650/t (port) in Australia for phosphate products and $500 for nitrogen – almost $100/t . Despite slowing fertiliser demand in India, Mr Whiteside said the market was still generally strong in South America and rain across much of the Midwest had revived US confidence. As a buffer against the uncertainty and price fluctuations which now pervade the sector Incitec Pivot has urged retailers to lock in set priced commitments so it can ensure adequate bulk supplies are in the pipeline. Incitec doesn’t want a repeat of last year when the company responded to retail indicators, only to be caught carrying a costly, surplus of unsold stock. It was not compulsory for buyers to take contracts, but without a forward order they risked not having their requirements satisfied in peak demand periods, or paying price premiums. “In the past there’s been no clear obligation for distributors to take the fertiliser they indicated they’d need by a certain date,” Mr Whiteside said. “But buyer contract arrangements have been standard in Europe or the US for 10 years. “Much the same situation already applies in the grain industry here if you’re buying for dairy farm or stockfeed mill.” The AFSA’s Mr Wheelhouse said the handshake supply deals which the sector had relied on could no longer be afforded by suppliers or farmers given today’s big swings in global supplies and prices. “In my father’s day prices only moved $5/tonne. Now they’ll jump $100/t in just a few weeks, then drop again a few months later, said Mr Wheelhouse whose family business at Bridgewater, Victoria, sells and applies fertiliser. However, a general fertiliser oversupply around the world, especially for phosphate and potash lines, had emerged late last year and was likely to continue through the first quarter of 2013. With European farmers “very cautious” about locking in fertiliser purchases far in advance of the application season in the current economically stressed climate, fertiliser prices could dip further before April. Urea was the exception, particularly if US corn plantings take off. “In the short term, at least, global buyers will continue to defer purchases in anticipation of lower prices given that short term requirements are covered,” Mr Kennes said. Fertiliser chief operating officer with leading manufacturer and importer Incitec Pivot, James Whiteside agreed prices appeared to be close to the bottom of the cycle by recent standards and “not particularly risky” for growers at the moment. Global index prices for diammonium phosphate (DAP) from Tampa in the US are currently down to about $US500 a tonne while the world urea market’s Arab gulf exports benchmark dipped slightly to around $US420/t this month. This translates to near $650/t (port) in Australia for phosphate products and $500 for nitrogen – almost $100/t . Despite slowing fertiliser demand in India, Mr Whiteside said the market was still generally strong in South America and rain across much of the Midwest had revived US confidence. As a buffer against the uncertainty and price fluctuations which now pervade the sector Incitec Pivot has urged retailers to lock in set priced commitments so it can ensure adequate bulk supplies are in the pipeline. Incitec doesn’t want a repeat of last year when the company responded to retail indicators, only to be caught carrying a costly, surplus of unsold stock. It was not compulsory for buyers to take contracts, but without a forward order they risked not having their requirements satisfied in peak demand periods, or paying price premiums. “In the past there’s been no clear obligation for distributors to take the fertiliser they indicated they’d need by a certain date,” Mr Whiteside said. But buyer contract arrangements have been standard in Europe or the US for 10 years. “Much the same situation already applies in the grain industry here if you’re buying for dairy farm or stockfeed mill.” The AFSA’s Mr Wheelhouse said the handshake supply deals which the sector had relied on could no longer be afforded by suppliers or farmers given today’s big swings in global supplies and prices. “In my father’s day prices only moved $5/tonne. Now they’ll jump $100/t in just a few weeks, then drop again a few months later, said Mr Wheelhouse whose family business at Bridgewater, Victoria, sells and applies fertiliser. “The Land” Read more: http://www.theland.com.au/news/nationalrural/cropping/general-news/fertiliser-price-lull-window/2644320.aspx?storypage=1

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