THERE have been concerns throughout this season about the lack of available urea, which we believe is the case in specific geographies.
Urea is like a powerhouse food for crops, especially cereals. Just as humans need a balanced diet to grow and stay healthy, plants need certain nutrients to thrive.
Nitrogen is one of the most important nutrients for plants. Urea is a type of fertilizer rich in this essential ingredient, helping plants get the nutrition they need to produce abundant, healthy grains.
Imagine a field without enough nutrition. Plants may be weak, produce less grain, and even not taste as good. This is where urea comes in.
When farmers spray urea on their fields, it’s like giving their crops a hearty meal. This ensures that we receive more food from each field and that the grain is of good quality.
This year, there have been rumors of urea shortages across the country. In reality, the fertilizer business has done a fantastic job. In 2023, record volumes of urea were imported into Australia.
Let’s look at the numbers.
In the first eight months of 2023, more than 2.5 million tonnes of urea were imported. Is it a lot or a little?
Let’s put things into perspective. Compared to 2021, imports this year increased by 316,000 t, with this figure reaching 369,000 t above 2022 levels so far.
These were the previous two years of records for urea imports, and we broke them.
I was expecting a huge crash when the August numbers came out, but that wasn’t the case.
I was discussing Australian imports with an industry contact, who brought up the subject of scarcity and how it is a sales technique as old as time.
This technique aims to create a sense of urgency in potential customers, enticing them to make a purchase more quickly than they otherwise would. The perceived scarcity or imminent unavailability of the item can increase its perceived value and desirability.
I’m not saying that’s the case now, but it seems like every year we hear the old advice “step in quickly before you run out.”
We can only sketch what the data says, and domestically, imports have been enormous.
So where did he go?
As always, as analysts we like to dig deeper into topics to see if we can get a clearer picture of the market.
There are some caveats to this data, as it is based on the value of fertilizer imports, not their volume, and is not refined by fertilizer type. It’s there to set a trend. The value of imports has been strong so far this year.
The graph above shows the average annual fertilizer composition in each state, as well as the composition for 2023. We can see that there has been a large increase in the value of fertilizer imported into Western Australia compared to other States.
And in terms of annual imports, there has been a large increase in imports into WA compared to other states.
This follows anecdotal reports that WA has had less difficulty accessing fertilizer than other states.
• Andrew Whitelaw is co-founder and director of Episode 3 (EP3)
