There's good news for growers entering the winter cropping season, with the urea price falling to the lowest level since January 2021.
In a market report last week, Episode 3 analyst Andrew Whitelaw said during April, the price of urea loaded on a boat in the Middle East averaged A$441, down from A$467 the previous month.
April 2023 pricing is down A$739 from April 2022. The replacement value landed in Australia is approximately A$507 to A$530.
Mr Whitelaw said the affordability of fertiliser had improved, with the ratio of fertiliser to wheat moving back to traditional average levels.
"Whilst grain prices have fallen from their highs, the reality is that the cost of producing has dropped, providing the falls in overseas markets are reflected within Australia," Mr Whitelaw said.
He said the big driver had been gas, which had fallen from the highs of 2022.
"Gas is important to the price of urea because it is the main raw material used in the production of ammonia, which is a key component in urea fertiliser production," he said.
Natural gas is approximately 70 per cent of the production costs of urea.
The news comes as Incitec Pivot Limited announces that the previously discussed urea offtake deal between its subsidiary, Incitec Fertilizers, and Perdaman Chemicals and Fertilisers is now unconditional, with Perdaman having obtained financing for construction of the new WA urea plant.
Under the agreement, IPF has agreed to take up to 2.3 million tonnes a year of granular urea from Perdaman's Karratha urea plant for a 20-year period starting from the date the plant is fully commissioned, which is expected to be in mid-2027.
IPL says pricing under the agreement is expected to deliver a "competitively priced product".
Up to 50 per cent of the urea is expected to be marketed within Australia, including through IPF's existing east coast distribution business, with the remainder marketed to key international export destinations.
IPL managing director Jeanne Johns said the agreement provided IPF with a competitive long-term domestic supply of urea for its Australian customers and to expand sales into growing global markets.
The agreement is expected to add incremental earnings before interest and taxes (EBIT) of about A$45 million annually to IPF.
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