Strong supply and lowering demand see fertiliser prices fall

by Gerald Hutching, February 1 2016, www.stuff.co.nz

Both of New Zealand’s major fertiliser companies have reduced their prices in reaction to a slump in fertiliser prices and a lessening in demand.

However they have indicated that cutting prices now will probably mean farmers will receive a lower rebate later in the year than in previous years.

Ballance and Ravensdown have announced cuts in all their products. Urea has dropped by $50 to $525 a tonne, the lowest price since 2007.

Diammonium phosphate (DAP) has reduced by $25 per tonne, granular ammonium sulphate by $15, and potash by $10.

Ballance chief executive Mark Wynne said that globally there was a lot of fertiliser supply, but offsetting that was less cash among the farming community.

The company had taken advantage of currency hedging to pass on savings to New Zealand farmers.

He said it had been hard to measure fertiliser use in the last few months and into the near future.

“A few months ago everyone had been talking about El Nino and the big drought that was coming. Farmers took those signals and quite a few applied fertiliser early to get the grass up and running.

“Now that the drought hasn’t come through as anticipated, farmers have got a reasonable amount of feed, so the challenge is how much fertiliser they are going to put on the next few months,” Wynne said.

Low dairy prices put huge pressure on cash flow, which would impact on fertiliser use.

Ravensdown  CEO Greg Campbell said the urea reduction represented a potential $37.5 million a year saving to farmers.

“For a large dairy farmer in the grip of a pay-out downturn or a sheep and beef farmer dealing with drought or weaker returns, these price differences could mean thousands of dollars staying in their bank account. This is far more useful to our shareholders at this time than a large rebate cheque later in the year,” Campbell said.

Mr Wynne said that taking some of the pressure off pricing for shareholders throughout the year would likely flow through to a lower rebate payment than the high levels enjoyed by shareholders in recent years.

A Ravensdown spokeswoman also confirmed there would be a smaller rebate.