July 2, 2008

Fertiliser Price Hikes Likely

Farmers are being warned to expect higher fertiliser prices as the availability of key manufacturing ingredients tightens in a worldwide shortage.

"The shortage of world resources is having a big impact, but sales have held up as farmers attempted to pre-empt price increases," Ravensdown sales manager Ross Aimer told farmers at the Federated Farmers' national conference in Christchurch.

"From three years ago we are seeing less fertiliser being applied by drystock farmers."

He said the co-operative was doing its best to smooth out price volatility.

Nitrogen has become the co- operative's main nutrient seller, in line with rising dairying returns, while phosphate and sulphur application is dropping. Sales of diammonium phosphate (DAP) have fallen by 52 per cent and urea less so.

Mr Aimer said "huge" increases in fertiliser growth in developing countries had tightened ingredient availability. World growth in fertiliser use had risen 4.5 per cent from a traditional two per cent rate, he said.

"The demand for nutrients is coming from countries like Brazil and India as they respond to the need for more food. Drystock farmers are putting on less (fertiliser in New Zealand) and dairy farmers are putting on more."

The world is expected to have to sustain eight billion people by 2020 and add pressure on fertiliser supplies. About 35 per cent of corn is now going to biofuel production, which is contributing to driving up food prices.

The availability of fertiliser ingredients is expected to vary widely in the future, with some hope that sulphur prices will ease. Large reserves of phosphate rock remain for superphosphate production in Morocco, but extracting equipment is expensive and prices have risen from under $US50/tonne last year to $US200.

Mr Aimer said prices could be expected to rise again for phosphate rock, while sulphur for DAP was expensive even though it was a waste product from oil.

From a traditional base of $US50/tonne sulphur was now $US1000/ tonne, but production was expected to increase to bring prices down, he said. DAP prices at more than $NZ1400 contain about $400 to $550 of sulphur and skyrocketed in May when China put a 135 per cent export tax on it.

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