The world's worrying shortage of phosphate fertiliser products has Australia stockpiling volumes it would usually export as the industry braces for an early 2027 demand rush.
Fertiliser heavyweight, Incitec Pivot Fertilisers, has also beefed up its capacity to import liquid urea ammonium nitrate (UAN) to help buffer eastern Australia's nitrogen needs over summer and into next year.
On the other hand, the crop nutrient supply business has conceded it has sold less granular urea than anticipated so far this year after the company's recent import efforts were helped by Canberra's procurement support program.
Although global panic about nitrogen supplies intensified after Persian Gulf hostilities destroyed gas supplies and blocked shipping in the Strait of Hormuz in March, urea demand from Australian farmers was subsiding again by May.
Farmers made do with existing stocks ordered early in the season and were reluctant to pay record market prices for more.
Australia traditionally secures about 60 per cent of its urea needs through the Strait of Hormuz, but extra imports continued to arrive from Asia and elsewhere after importers had rushed to lock in extra supplies for winter.
Incitec Pivot secured a deal with Indonesia's state-owned producer, PT Pupuk, helped by a lobbying trip to Jakarta by Prime Minister Anthony Albanese in April.
"We benefitted from higher margins as global fertilizer prices rose," said Ridley Corporation managing director, Quinton Hildebrand, reporting the company's $27.6 million full-year statutory net profit after tax.
Ridley's underlying earnings before interest, depreciation, amortisation jumped almost 62 per cent to $158m, largely thanks to earnings from fertiliser emerging "at the higher end of expectations", just nine months after the big stockfeed business had bought into the fertiliser game.
"However, margins were partially offset by lower fertiliser volumes as high prices led farmers to reduce orders," Mr Hildebrand said.
Ridley snapped up Incitec Pivot's big eastern states fertiliser distribution business a year ago, paying what was considered a bargain $375m.
Australia's biggest fertiliser business also has sole offtake rights to the country's only ammonium phosphate production site, Phosphate Hill in western Queensland.
Although the critical crop starter fertilisers monoammonium and diammonium phosphate (MAP and DAP) generally cannot be stored for more than about three months, Mr Hildebrand said Incitec Pivot was taking a conservative export position, making sure it held product for domestic requirements.
Normally the fertiliser company exported product throughout the second half of the year, then augmented its new year requirements in Australia with imports from December to February so it could to satisfy peak phosphate demand for the winter crop sowing season from February to April.
Next year's domestic cropping season supply squeeze will be intensified by a forced two-month shutdown at Phosphate Hill in March for essential maintenance.
"I think there could be phosphate limitations going into the start of 2027," Mr Hildebrand warned.
"Sulphur production and phosphate manufacturing in other parts of the world are being badly impacted by the closure of the Strait of Hormuz.
"There's a lot to play out yet, and there's no resolution to the war."
Global phosphate prices have continued sitting near record highs, up from about $US670 a tonne for DAP in early 2026 to as much as $US915/t, and $US860 for MAP, due to limited availability and historic sulphur shortages.
However, buyer resistance to current prices has triggered some softening in the market as sellers try to generate sales.
"Phosphate prices have reached resistance, but the cost base and lack of readily available tonnes remain important," said Australian Fertilizer Corporation chief executive officer, Stein Haugan.
"Buyers can expect more negotiating room, although a rapid price collapse is not our base case."
Meanwhile, although granular urea demand has fallen this season, Incitec Pivot is about to import its first cargo of UAN for foliar or direct soil injection application.
The company spent the past five months repurposing storage facilities at its distribution centres in Adelaide and Portland.
Mr Hildebrand said with the Middle East conflict set to undermine confidence in fertiliser supplies into the new year, UAN would provide a useful alternative source of nitrogen for croppers with appropriate gear.
The company also expected to claw back some granular urea market share in the northern cropping zone after moving its Brisbane-based import and distribution operations from Gibson Island to purpose-built facilities nearby.
"We hope to recover some market share in that region because sales have been lost due to the previous inefficient facilities," he said.
In Townsville, additional storage and distribution space has been leased to increase capacity to largely service the sugar industry.
Mr Hildeband said Ridley's Incitec Pivot takeover had almost doubled the company's earnings base.
While the timing of the move into fertiliser had been fortuitous for earnings, but challenging because of the risks and supply problems created by outbreak of war between the US and Iran, the fertiliser team had done a "particularly good job" sourcing urea supplies to replace Middle East contracts.
He said the fact that urea prices had since dropped significantly to pre-war levels, was "quite an anomaly" given 30pc of world production was halted, but it was partly because the timing coincided with a northern hemisphere demand lull.
In response to initial soaring prices and market uncertainty, Incitec Pivot had taken advantage of the federal government's fuel and fertiliser security facility (FFSF) which encouraged importers to source supplies, providing underwriting protection if global prices fell, while giving up any gains in a rising market.
The facility provided a safety net for four Incitec Pivot urea shipments, all of which had landed after June 30.
For the avoidance of doubt, there was no earnings impact (on Ridley) from the fuel and fertiliser security facility in 2026
The federal government's fuel and fertiliser security facility (FFSF) provided a safety net for four Incitec Pivot urea shipments, all of which had landed after June 30.
"For the avoidance of doubt, there was no earnings impact (on Ridley) from the FFSF in 2026," he said.
Rabobank has estimated Australia has imported about 104 per cent of its expected urea needs for the 2026 winter cropping season.
"This suggests domestic supply is now in a more comfortable position, easing concerns around local supply constraints heading into the end of the season," said analyst Oskar Mitchell.
However with European gas storage levels now below seasonal averages going into winter and competition expected to intensify, the risk of higher global fertiliser prices heading into 2027 was rising.
Australian fertiliser costs for the next season were expected to remain volatile, including price spikes later this year.
