IT MAY be a much quieter period in fertiliser land than the same time last year, when the price was plummeting, leaving fertiliser companies holding overpriced inventory, but prices are creeping up, and Incitec Pivot (IPL) is ensuring it cannot be accused of a lack of communication with its farmer customers again.
General manager of IPL Fertiliser Gary Brinkworth said following the senate inquiry into fertiliser prices earlier this year, in which IPL copped significant bad press, the company was determined to get on the front foot in terms of ensuring market signals were available to the public.
“We have made a commitment to improve the levels of communications between us and the growers,” he said.
“We just want to make sure the market and rural distributors are as well informed as they can be.”
And Mr Brinkworth said while the company was not bearing positive news for growers on the pricing front, it was still important for growers to have a feel for what next year was likely to bring.
The biggest impact is likely to be from a decent price hike in ammonium phosphate products, which Mr Brinkworth estimated could rise a total of 20 per cent.
“Our inventory levels are at lows, and we are looking to bring in more, higher priced product in.”
Mr Brinkworth thought the latest price jag was a sign the international phosphate market had reached its bottom and was now on the way back up.
Currently, prices in Australia are stagnant, sitting at around $530 a tonne port for DAP, but Mr Brinkworth said new pricing would reflect the rise in international values.
A recently released ANZ fertiliser forecast backed up Mr Brinkworth’s claims, pointing to a rise, in Australian dollar terms, of $65/t in phosphate prices, largely on the back of increased US demand.
Mr Brinkworth said the price rise would filter through quickly to the retail sector, but pointed out that this was a result of low Australian inventory, rather than a cynical push on the fertiliser industry’s behalf to take immediate advantage of a price rise.
“There’s low inventory through the system, but I think it’s important to remember that we are well below the pricing points of early in 2008, when prices for DAP got up to around $1600/t.”
He said last year’s incident when IPL got caught out holding too much stock had made an impact on the way the company accumulated stock.
“There’s no doubt it had an influence, and we are looking to better manage our inventory levels, this may mean holding less of a position to be able to react when the market moves.”
“We will definitely be holding less stock throughout the cycle.
In spite of this, he said he was confident IPL would be able to meet supply demands when growers needed, if not necessarily when they wanted.
“There may be areas of short supply at some stage in between now and peak cropping demand in early autumn next year, but we assure growers there will be supply when they need it.
“We are trying to make sure it is available for those who need it, so at this time of year we are working closely with the horticulture and pasture markets that use fertiliser at this time of year."
Mr Brinkworth also suggested nitrogen prices would rise, but said it was not likely to be as dramatic, not moving far from its current rate of $500/t at this stage.
Meanwhile, the ANZ report suggested one area that could be beneficial for growers was in the potassium sector, which is still moving downward.
Again, IPL’s view was that farmers would only use fertiliser if there was a profit to be made, which may require a jump in grain prices.
“If they cannot see the reward for inputs, then I think we saw what can happen this year, when many farmers cut their fertiliser rates to cut costs.
“Of course we are concerned if farmers cannot get the profitability that they need, that this will have an impact on use.”
However, he said fertiliser was still cheap compared with recent years.
“Even with a price rise, the rates we are seeing today, are low relative to prices we have seen.”
He also thought farmers had already dropped fertiliser rates as low as they could.
“Many farmers significantly dropped their fertiliser rates last year, the question is whether they have the nutrients there to be able to do it again.”
He said IPL was acutely aware of its perception within the rural community and was aiming to again develop a trusting relationship with growers.
“We’re an important part of the rural landscape and having growers feeling the way they did is not a good thing.”
“The senate inquiry, for us, was a good opportunity to stop and reflect on how farmers and rural communities were seeing us.
“The upside of the inquiry is if it can help us get back on track and support our customers as best we can.”
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