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Tuesday, October 24, 2017

Fuel and Fertilizer update.

By Andrew Whitelaw  |  Source: ACA, Trade

Key points

  • Diesel prices have risen 10¢ since June.
  • Urea prices have risen A$39
  • DAP prices have remained stagnant, and are likely to remain low.

2017-10-24 Grain Fig 1

2017-10-24 Grain Fig 2

2017-10-24 Grain Fig 3

Harvest is upon us once again, we’ll be burning diesel like David Boon tanking beers on a flight to England. At Mecardo, we update regularly on input pricing as we believe it is important to take a strategic approach not only to selling our outputs, but when purchasing our inputs.

Since the end of June, we have seen diesel prices sharply rising 10.9¢/l (figure 1) on average across the country. Although prices are only 6¢/l higher than the same time last year. This maintains prices at 10¢/l below the average price since 2010. Fuel prices are driven by the direction of crude oil, and there are expectations that OPEC will stick by their commitments to push prices through reducing supply. However, it is unlikely that we will see the >US$100 levels experienced in recent years.

Harvest is upon us, but it won’t be long until we start seeding for the 2018/19 crop. If you haven’t already started, you will be needing to purchase fertilizer. In figure 2, we can see the urea price (in A$) has dramatically increased in the past month (+A$39). This has resulted from shutdowns of a number of plants, causing a supply shortage. However, it is expected that that supply come back on stream and will most likely to reduce pricing.

DAP has maintained pricing over the past month, with relatively little change (figure 3), the DAP market has fallen A$55 since the highs of the year in April. Global DAP demand continues to be stagnant, and prices are also likely to continue to remain stagnant throughout the coming months until we see northern hemisphere demand pick up in the new year.  

What does this mean?

Input prices remain low compared to average since the start of the decade. When it comes to fertilizer, there is little signs of upwards price movements. However, when it comes to fuel, there is a more risk of upward price movement if OPEC continues to hold production levels down. 

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 


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