What’s Happening in The Market – June 2021
All Prices are Up!
It looks like the world’s governments stimulus’ are working a treat, everyone is spending, and our economy is going well with so much government money and incentives flowing through the system. As a result, all manufacturing is struggling to keep up. Shipping around the world is still slow and expensive, and a Covid shutdown in one country means delays in product being made, or prices of raws and ingredients increasing sharply, as key suppliers struggle to supply. This is having a worldwide flow-on effect on basically any product we are purchasing – fertiliser, chemicals, utes and farm machinery! Let’s hope the same flow on effect happens to our grain prices!
In the meantime, we are seeing urea prices above $700, wholesale glyphosate prices have jumped $1L in the last few weeks and all other products heading in the same direction. I listened to an economist speak the other day, and his advice was
“ buy what you need now for the next 12 months because it will return you more money than keeping it in the bank and buying when you need as all prices are increasing ”
In the land of crop protection, that seems to be correct with what we are seeing at the moment.
Glyphosate – sharp increases in the technical price overseas are flowing through locally – we recommend you look to buy out to the end of this year. This makes glyphosate technical extremely profitable for overseas manufacturers, so when world demand slows down, we expect prices to come back, but that won’t be until some time in 2022 (given that supply for the rest of this year, and even early next year, is being locked in at prevailing prices).
Paraquat – Relative to glyphosate, paraquat is now a far more cost-effective knockdown. Price bottomed 12 weeks ago and is starting to increase gradually.
Fertiliser – Urea remains on its bull run. It doesn’t matter where you are in the world; prices are moving higher and, unfortunately, do not show any signs of slowing in the short term. Globally, there are a lot of things that are continuing to support higher prices:
- Inventories are tight – no place in the world has high inventory levels, which means a lower chance that someone feels like they need to lower pricing to reduce inventories
- Production is at risk of unplanned downtime due to delays in scheduled repairs. Nitrogen manufacturing requires high pressure, high temperature and high-stress processes that wear out equipment. Plants generally get shut down on a programmed/scheduled basis to repair equipment; Covid has delayed that maintenance, so a lot of production is operating on borrowed time.
- Manufacturers are well sold into the next couple of months – any manufacturer, regardless of product, likes high prices! If a Manufacturer is very well sold into the forward weeks/months, they feel very little pressure to make sales which means they can keep price offers higher.
- China shows little sign of exporting large volumes or ramping up production rates – China is the largest producer globally, and can quickly oversupply the world. While that is a possibility going forward, there are no signs that it will occur in the near term.
Fortunately, we have been able to cover customers initial requirements however, as we know, it’s been dry, so volumes have not been massive to this point. If (it’s a big IF) we get wet conditions on the East Coast of Australia, we will see supply get tight and no softening in price.
Prepayments – we are offering Smart Prepayments at 4.75%pa reward rate on all funds deposited before June 30. If this is of interest, please download the form online and send them in or contact your local sales rep. This has been a popular product the last few years, and we are happy to continue to offer this to our loyal customers.
Hopefully, the world can settle down a little in the back half of 2021, but until then, we can only hope that plenty of rain continues to flow through the countryside as the crops can catch up to a late break. All the best for the next month ahead.
