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Australian farmers reject fertilizer purchases as drought lingers, Reuters report

Published by , Editorial Assistant
World Fertilizer,

Reuters is reporting that Australian farmers are postponing buying fertilizer and other products they typically use to protect their crops as a drought across the country’s east coast darkens the outlook for the rural sector in one of the world’s top exporters of grains.

Wheat, the nation’s largest rural export, is usually sowed in late April, but this year farmers are trying to minimise expenditure on items such as fertilizer, herbicides and pesticides amid the threat of another crop failure following the hottest summer on record.

Consequently, companies that make those products like Nufarm, which reports half-year financial results on Wednesday, could become the latest to be caught in the fallout from the catastrophic drought that is already hitting everything from wine production to the wool clip.

“I would normally have bought about 100 t of (fertilizer and crop protection) product by now, but there has been no rain, we have no soil moisture, so I haven’t purchased any this year,” said Tom Woolaston, a grains and livestock farmer in Somerton, around 440 km northwest of Sydney.

Analysts have said it is too early to forecast the demand for fertilizer and crop protection products in 2019 and 2020 because rain later in the season could improve it.

“If rains arrive in September, farmers will increase the use of nitrogen, if it remains dry, demand will fall further,” said Wesley Lefroy, an analyst at Rabobank.

Demand for fertilizer in Australia fell 2% to total 6.5 million t last season, according to data from industry group Fertilizer Australia.

In September, Nufarm reported an annual loss which sent shares down over 8%. At that time, Nufarm said a return to profitability was likely in 2019, but that this would depend on a return to ‘more average (weather) conditions’ by winter.

“Nufarm has guidance but in our opinion, there is a significant downside risk,” said Belinda Moore, equity analyst, Morgans.

A poor season last year also meant that farmers stopped applying fertilizer earlier than usual, leaving them with stockpiles that still need to be worked through, growers said.

Data from the Australian Bureau of Meteorology shows that almost half of the states of New South Wales and Queensland have recorded less than 50% of their regular rain quantities over the last three months, with dry conditions set to persist until at least the end of May.

New South Wales and Queensland usually produce roughly half of all Australian wheat. The country’s wheat exports were worth an estimated A$5.5 billion (US$3.9 billion) last year.

“There is no margin for error. There is virtually no soil moisture, so any prolonged period of dry weather is going to leave some farmers unable to produce a crop again,” said Phin Ziebell, agribusiness economist, National Australia Bank.

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