Arable Farmers Shift to Dairy as Fuel and Fertiliser Costs Surge
Some arable farmers are getting out of arable and converting to dairy in the faced of soaring fuel and fertiliser prices on top of a very poor growing season.
According to RaboResearch farm inputs and commodities analyst Paul Joules, global urea supplies are in a fragile state, with several key suppliers exporting lower volumes year-on-year, creating a "ripple effect" for volumes available to New Zealand fertiliser importers.
Urea is by far the most widely traded fertiliser in the world and, for New Zealand, represented more than a quarter (29%) of total fertiliser imports in 2024.
In the report ‘What tight urea supplies mean for global prices and New Zealand farmers’, RaboResearch says due to minimal volumes of urea produced domestically, New Zealand is particularly sensitive to global events.
Joules says 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,” he says.
Joules said 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 45% higher,” he adds.
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,” he says.
The RaboResearch report said while most of the chief urea-producing regions and countries (Europe, Iran, Egypt and China) that are experiencing supply issues do not directly supply New Zealand, “they still account for global losses to the supply, which creates a ripple effect for available volumes for Kiwi importers”.
“The bank expects the strong outlook for the US dollar is likely to keep the NZD weak in 2025,” says Joules.
Jason Minkhorst, general manager customer at Ballance, says that despite recent upward trends in urea pricing within the domestic market and sustained pressure from the weak NZ dollar, Ballance is holding urea and SustaiN prices steady.
Nearly all fertiliser is imported and priced in USD, meaning the cost of securing these products has increased significantly, he says.
“However, Ballance is doing everything it can to absorb those pressures, allowing farmers to focus on growing feed while weather conditions are still suitable for growth and application,” says Minkhorst.
