Lack of local production leaves Australia sensitive to urea price shocks

Australia produces only small amounts of a key fertiliser type and as a result is particularly vulnerable to global shocks, according to new research.

Agribusiness banking and financial services company Rabobank’s What tight urea supplies mean for global prices and Australian farmers has found that supplies of the most traded fertiliser type in the world “currently sit in a fragile state”.

It represented 46 per cent of fertiliser imports to Australia in 2024, and lower volumes from several key exporters creates a “ripple effect” for Australian farmers.

RaboResearch farm inputs and commodities analyst Paul Joules (pictured), the report’s author, said in a statement that he expects the market to remain volatile and prices elevated compared to historical averages.

“Ongoing supply issues in key exporting regions and the sensitive nature of natural gas markets – the predominant feedstock for urea production – suggest that urea prices will likely stay high,” he added.

“At present, prices are trading around the five-year average. However, if we were to compare current prices with the pre-Russia-Ukraine war five-year average price, they are 40 per cent higher.”

Though geopolitical and natural gas price instability, as well as the weak Australian dollar (which fell under $US 60 cents on Monday morning) were impacting prices, it is questionable whether boosted local supply of urea could undo a reliance on imports.

“Although the proposed domestic urea projects can provide some benefits – especially during supply shocks – significantly lower prices are not anticipated solely from these proposed developments,” said Joules. 

“Domestic urea prices are expected to align closely with global levels, as it is anticipated Australian producers will base pricing on global benchmarks.”

Picture: supplied

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