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High fertiliser prices – in addition to high diesel and labour costs – are squeezing farm budgets, GrainGrowers, a national group representing arable farmers, has warned.
“The high cost of fertiliser is having a really big impact,” GrainGrowers Chairman Brett Hosking said.
He said Australian farmers will be closely watching the fertiliser prices during the winter cropping season.
Data from Thomas Elders Markets showed the cost of sending fertiliser to Australia in April 2022 was $1251 per tonne compared with $533 per tonne in May 2021.
The conflict in Ukraine has driven the price even higher.
Ukraine has deposits of vital fertiliser ingredients urea and potash, and exports have been limited since Russia invaded the country on February 24.
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Russia is also the world’s largest fertiliser exporter but trade sanctions have imposed limits on imports into Australia.
Added to the problem is the high price of natural gas used in the production of fertiliser.
Australia imports most of its fertiliser from the Middle East, a major producer of gas.
But Thomas Elders Markets analyst Andrew Whitelaw said the gas price has “gone through the roof” since the invasion of Ukraine.
Grain farmers are now warning cost pressures will lead to lower yields at the next harvest.
“Together with the supply chain problems in China – which produces much of the world’s fertiliser – and now the Ukraine war, it’s been a perfect storm,” Hosking said.
While high grain prices and moisture levels are giving growers confidence in the current growing season, this may change in coming months.
Higher fertiliser prices mean the grower is taking a great risk in recovering the costs.
“The stakes and risk profile of the growers become a whole lot higher,” Hosking said.
He is concerned that despite favourable conditions, because of cost pressures grain farmers will “reach a point of diminishing return” in yields of wheat, barley, oats, canola and other grains.
And the pressure on farmers will feed into prices on supermarket shelves, especially the price of white meat.
Corn fed to chickens and pigs helps animals put on weight quickly and is one of the largest expenses in livestock production.