The urea ripple effect

AS FARMERS go, full throttle sowing dry with the hope of rain, an Agri bank is warning that urea, generally used as a booster once the crop is established, may become more difficult to source.

Rabobank says that their newly-released report points to global urea supplies currently sitting in a fragile state, with several key suppliers exporting lower volumes year-on-year, which creates a “ripple effect” for available volumes for Australian fertiliser importers.

The agribusiness banking specialist says urea is by far the most widely-traded fertiliser in the world and, for Australia, represented nearly half (46 per cent) of total fertiliser imports in 2024.

In the report, titled “What tight urea supplies mean for global prices and Australian farmers”, the bank’s RaboResearch division says due to minimal volumes of urea produced domestically, Australia is particularly sensitive to global events.

Report author, RaboResearch farm inputs and commodities analyst Paul Joules said that the urea market is expected to remain volatile due to complex supply chains and geopolitical influences, with 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.”

Mr Joules said that given complex supply chains, urea prices tend to trade with considerable volatility.

“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 percent higher.”

He said that in addition to geopolitical issues impacting fertiliser prices and availability, natural gas is the other key influence within the market.

“The sensitivity of natural gas markets – to both weather and geopolitical events – adds to the volatility of urea prices.”

The RaboResearch report said that while the majority of the chief urea-producing regions and countries, Europe, Iran, Egypt and China, are experiencing supply issues, and do not directly supply Australia, they still account for global losses to the supply, which creates a ripple effect for available volumes for Australian importers.

In 2024, 79 per cent of Australian urea imports came from the UAE, Saudi Arabia, Qatar, Indonesia and Oman.

The report highlights that 3.85 million tonnes of urea was imported into Australia in 2024, which represents over 90 per cent of its usage, making it by far the most imported fertiliser locally.

Mr Joules said the local farm-inputs sector is questioning whether Australia can successfully reduce its import dependence via local urea production in the near future.

“At present, there is not a definitive answer to this question, however there are a number of ongoing projects, which make use of Australia’s natural gas resources.

“Two of the most promising projects are planned in South Australia and Western Australia. Assuming these projects were both to go ahead, that would mean production would total 3.3 million tonnes, 0.55 million tonnes behind Australia’s total imported volume of urea in 2024.”