corporatefile.com.auCan you comment on the current state of and...

corporatefile.com.au

Can you comment on the current state of and outlook for the global nitrogen and phosphate fertiliser markets?

Acting CEO James Fazzino

The last six months has seen an unprecedented collapse in global fertiliser
demand. From late 2008 we saw Latin and North American demand contract as
the impact of the global financial crisis took hold and this has continued in
Europe and Asia.
We see continued reductions in fertiliser application rates for the balance of our
financial year and consequently weak pricing for Urea and Di-ammonium
phosphate (DAP).
Looking at the causes, the global financial crisis was significant. Volatile
forward-traded soft commodity prices, combined with high input costs and
contracting credit lines caused already conservative farmers in Latin and North
America to become even more risk averse, resulting in the deferral of
purchases and a contraction in application rates. This trend has also been
repeated in Australia.
In phosphates, global production was initially curtailed but has more recently
returned as cash flow has become an issue for some producers. With a lack of
soft commodity price conviction and a continued risk aversion by farmers,
demand remains weak.
In urea, soft industrial activity has dampened demand for gas in North America
and Europe and falling gas prices across both continents has flowed through
into lower urea prices.
However, the outlook for fertiliser consumption remains positive in the
medium term and arguably has been strengthened by events this year. There is
“no free lunch” in nutrients and we are likely to see both a reduction in yields
and a reduction in soil fertility as a result of the under-application of fertiliser
this year. Farmers will need to compensate for both impacts in future years,
meaning that we have seen demand deferral rather than demand destruction in
2009.