The cost of producing food is set to increase with the Chinese government expected to restrict the production and export of a crucial agricultural fertiliser.
Key points:
- Chinese phosphate fertiliser producers are expected to stop exporting for more than six months
- Already high prices of important fertilisers are likely to increase
- Moves to restrict production are not related to Chinese Australian trade tension
China’s economic planning body, the National Development and Reform Commission (NDRC), is moving to restrict the production and export of phosphates until the middle of next year.
Phosphorus is an essential plant nutrient. Australian grain farmers use the granulated fertiliser at planting to establish crops.
The fertilisers are made from phosphate rock reserves mined mainly in China, Morocco, Western Sahara, the US and Russia.
Last year 65 per cent of the mono ammonium phosphate (MAP) fertiliser used in Australia came from China.
Phosphates editor with fertiliser market publication Argus, Harry Minihan, said US import duties on Moroccan and Russian origin phosphates had caused the product’s price to double in the past year.
He said restricting its production and export would serve China in two ways in this high price environment.
“The Chinese government want to make sure there is enough product in the country for farmers, and they are also trying to reduce emissions as well.”
However, this will cause pain for other nations.
“China is the top phosphate supplier into Australia, and if there is a restriction in exports, it’s going to have some real significant impact on Australian buyers.”
Not a trade issue
While a phosphate shortage will drive up costs for Australian farmers, Mr Minihan said restricting exports was not related to trade tensions between the two nations.
“This is going to have severe effects on other major importers as well,” he said.
“It is not just Australia that is going to be affected.
“India is the world’s largest DAP importer, and they still have significant requirements for their winter rabi season.”
Difficult purchasing decisions
Supplied: Queensland Alliance for Agriculture and Food Innovation
)Wes Lefroy, senior agriculture analyst with Rabobank, said prices were also high across the range of farming inputs, including chemicals.
“From a glyphosate perspective as well, prices out of China have more than doubled this year, and around 65 per cent of the globe’s glyphosate comes from China, and that represents a large chunk of Australian supplies.”
Mr Lefroy said there was no reason to expect fertiliser prices to fall before next season.
Currently, urea and phosphorous fertilisers are trading either side of $1,000 a tonne, much higher than usual levels.
“We’re expecting prices to remain elevated into 2022, which puts farmers in a difficult position ahead of next season,” he said
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