Canberra has slowed its much-publicised fertiliser import underwriting program as Australia's urea stocks reach what some say are the biggest mid-season volumes in years.
Despite global shortages, domestic urea prices have also drifted down near, or below, levels quoted before the supply-crippling war in the Persian Gulf.
However, concerns continue to mount around the availability and cost of ammonium phosphate and superphosphate fertilisers, which will be high on farmers' new-season inputs lists within months.
Aside from western Queensland's Phosphate Hill production site, Australian croppers largely rely on granular monoammonium and di-ammonium phosphate (MAP and DAP) imports from the Middle East, particularly Saudi Arabia, which could be badly constrained by intensifying hostilities in the Red Sea region.
Single superphosphate supplies are also primarily sourced in the Middle East and North Africa.
"Any sustained Houthi rebel disruption to the Red Sea shipping route would significantly extend transit times into Australia and increase freight costs at a time when product availability is already exceptionally tight," said Australian Fertilizer Corporation chief executive officer, Stein Haugan.
While fertiliser shipping movements were already severely constrained by Iran's blockade of the Strait of Hormuz, Iranian-backed Houthi forces were promising a maritime embargo of Saudi Arabia, blocking the Bab al-Mandab Strait into the Red Sea.
Mr Haugan said global fertiliser logistics would face unprecedented pressure if both straits experienced more shipping disruption, or even just increased threats of vessels being attacked.
This month's global phosphate prices, around the $US900 a tonne mark (cost and freight), continue to be driven up by serious sulphuric acid shortages, which have also been intensified by the Persian Gulf hostilities.
Fertiliser plants in China, Vietnam and other Asian countries have cut or halted production because high-priced sulphuric acid is being diverted to other manufacturing areas.
This month Phosphate Hill's new parent company, Ryowa, part of Brisbane-based Mayfair Corporation, collected $160 million in federal and Queensland government loans to help it deal with significant site maintenance and soaring sulphuric acid costs.
Delivered MAP prices for eastern Australian farms have risen about $200 a tonne this year to about $1500/t, up from less than $1200 last winter.
Meanwhile, the federal government's efforts to help secure adequate urea fertiliser supplies in Australia have supported about 340,000t of imports by Incitec Pivot Fertilisers in the eastern states, and CSBP and Summit Fertilizers in Western Australia.
Most of that volume has now arrived to fully satisfy this season's expected cropping demand.
It complemented about 86 per cent of urea orders already secured by importers before the underwriting scheme was triggered.
However, future fertiliser needs may be considered on a case-by-case basis, according to Canberra.
The government was working with the industry to closely monitor fertiliser supply and market conditions.
Export Finance Australia's underwriting program would be available should it be required.
The underwriting scheme has partially covered the downside risk of global prices falling after urea has been secured from an overseas supplier and before reselling in Australia, thereby encouraging companies to maintain their normal supply patterns.
If global prices lift, any increased sale benefits must be shared with the government.
The $7.5 billion Fuel and Fertiliser Security Facility (FFSF) triggered a flush of mid-season urea imports.
However, global prices have eased since the initial shockwaves caused by the Iran war, partly because of a demand slowdown in the northern hemisphere, India and Brazil.
"As a result, there's probably more urea in Australia now than there has been at this time of the season for three years," said Australian Fertiliser Services Association president, Heath Boseley.
Port prices in Australia have slumped from about $1400/t two months ago, to about $800 in the past week, or mid-$800s delivered on-farm.
Retailers said prices were now cheaper than before hostilities erupted in Iran.
Some suppliers had discounted urea to spare for winter crop top dressing.
Incitec Pivot Fertilisers president, Scott Bowman, said various purchasing initiatives, including the FFSF underwriting scheme, appeared to have the domestic pipeline well stocked to satisfy demand.
However, nitrogen fertiliser would still be required into summer for horticulture, cane, summer irrigation crops and dairy pastures.
Industry analysts noted that after spending much of the past month in a holding pattern, global urea prices have begun reviving on demand from Europe, Brazil, Argentina and North America, although key Indian buyers were not so active, yet.
Mr Bowman, also chairman of Fertilizer Australia, said there was more for the industry to do to secure adequate phosphate supplies, and the level of uncertainty in the Middle East and tight sulphur markets would provide challenges.
"We're doing the work to get product where we can," he said.
Any further deployment of FFSF help to support imports would be "entirely up to the government".
Managing director with the McGregor Gourlay farm services network in northern NSW and Queensland, Josh McGregor, believed Phosphate Hill supplies should keep the ammonium phosphate market "ticking along" and satisfied until later this year.
"But buyers will have to put their name on orders," he said.
"The supply-demand balance in phosphate markets is pretty tight and unlikely to change for quite a while.
"I think if growers are prepared to make a commitment early there's no reason to be too worried, but if you're hanging out for a better price later on, it probably won't work out."
There was no appetite for risk among distributors.
"Many were badly burnt when urea prices fell and they're in no position to go through that again," he said
Phosphate Hill, part of Incitec Pivot's business until last year, has made clear it could not have guaranteed continued MAP and DAP supplies without the government support it received.
Ryowa chief executive, John Canavan, said soaring costs related to the Iran war and regular capital works made it difficult to compete globally at this point in the market cycle.
