Fertiliser Supply Optimism Amidst Ceasefire Hopes and Shipping Concerns

While a ceasefire deal between the US and Iran is yet to be finalised, the re-opening of the Strait of Hormuz could happen within days and farmers are optimistic about getting their hands on a reliable and cheaper supply of fertiliser.

A third of the world's fertiliser passes through the strait so its closure during the conflict cut off supplies into Australia and pushed prices up.

The federal government has secured an additional three shipments of fertiliser for farmers during the important winter cropping season but Rabobank agribusiness analyst Stefan Vogel said it would take a while for shipping to get back to normal.

"Even though there might be ink on paper later this week … the flow of goods will take a little bit of time," Mr Vogel said.

"There's still a lot of uncertainties."

Mr Vogel said shipping companies may also be nervous about resuming passage through the Strait of Hormuz.

"[They'll be thinking] 'the peace deal might fall apart and the ships might get stuck again'."

"We might see a few companies being a bit more reluctant to go in and out," he said.

Fertiliser on the way

Concern about tightened supply of fertiliser prompted the federal government to ramp up its efforts to secure shipments.

1.4 million tonnes of urea has been imported since late February, and three new shipments are on their way.

Incitec Pivot, CSBP, and Summit Fertilizer have been underwritten by the government with financial guarantees to put the three new boats on the water.

"We've got approximately another 98,500 tonnes of urea coming in for Australian farmers," agriculture minister Julie Collins said.

"That takes the total now through the Export Finance Australia arrangement to around 340,000 additional tonnes of urea coming into the country."

"The news of an agreement is very good news…but certainly, we do know that recovery will take some time," she said.

Other importers 'miss out'

One Australian fertiliser importer not involved in the government's financial agreement has described the underwriting as unfair.

"Sixty per cent of importers have missed out (on) government support," ANZ managing director Mark Been said.

He said the three companies with financial guarantees "only make up probably 35 to 40 per cent of the entire supply chain or normal imported product in Australia".

Ships are on the water for weeks and global prices fluctuate, so the price at departure may be higher than what an importer can sell the product for when it arrives.

Mr Been said his business has to wear that difference, but the ones supported by the government do not.

"When we're competing on a unlevel playing field it's not good enough and it's ultimately not going to be sustainable for us to continue."

Minister Collins said the financial agreement was made in consultation with the industry.

"We have done this obviously working with industry and at industry's request to make sure that we have the urea in Australia that our farmers need," she said.

"Our prime main concern and objective has always been to do everything we can to shield Australians as much as possible."

Decisions on the farm

The volatile supply and eye-watering cost of fertiliser has been tough for farmers in the middle of their winter cropping.

Western Victorian agronomist Marty Colbert has spent hours working out how much fertiliser is needed on the 12,000 hectares of crops he looks after.

"We're talking anywhere between $200 or $300 a hectare just on a nitrogen budget," he said.

And with urea sitting around $1100 a tonne, Mr Colbert said farmers are "being very very cautious" about what they use.

"It becomes a real game of strategy to allocate it."

Recent rain in western Victoria has put more moisture in the ground, increasing the chances of good growth.

"We need to chase that potential yield with a nitrogen supply," he said.