Miller Magazine Issue: 147 March 2022

114 Country Profile MILLER / march 2022 Whilst it is still very early in the Australian grain growing sea- son, and as mentioned previously, we can face a large number of climatic issues between now and harvest. The agronomic conditions are extremely inviting. The summer rains have re- sulted in very solid soil moisture profiles through large parts of the eastern states. Provided Australia doesn't face any disasters this would place the Australian well above average and ensure a bounti- ful surplus to meet the world's market. It isn't all rosy at the moment. Farmers are facing strong ag- ronomic conditions but are also facing some of the most ex- pensive input costs in recent years. The diesel market in Australia very closely follows the crude oil market due to diesel being a refined derivative product of crude oil. If the crude oil price rises, then diesel will rise (and vice versa). The crude oil market has risen in recent months due to in- creased demand. This rise was exacerbated in 2022 due to geopolitical concerns. Namely, the risk premiums that are be- ing added to the market as tensions remain between Russia/ Ukraine and UAE/Yemen. These are two regions that contrib- ute large volumes of oil and gas to the global economy This has led to fuel prices hitting the highest price since 2008. As grain growers start to make purchase decisions in the months approaching seeding, prices are likely to be at high levels compared to recent seasons. Producing grain requires large diesel volumes and is one of the top five costs facing farmers in Australia. The highest single cost that grain farmers face is fertiliser. The second half of 2021 saw large increases in the price of fertiliser around the world. The price of fertilisers have risen to the highest nominal price on record. When accounting for in- flation prices have not exceeded the highs of the early 1970's. The rise in fertiliser pricing levels is directly attributable to the increase in the cost of energy. The production of fertiliser is highly energy-intensive, and as energy increases in cost, so does the price of fertiliser. This relationship can be viewed in Chart 3, which displays the average monthly price of both Netherlands gas and Middle eastern Urea. The higher cost of energy led to higher fertiliser prices around the world, leading to further secondary effects. The largest of these was the ban on the export of fertiliser from China between October 2021 and June 2022. The purpose of the ban was to ensure to limit the capacity of domestic fertiliser manufacturers to access the global mar- ket, thereby reducing prices and ensuring supply for Chinese farmers. China is a major global manufacturer and exporter of fertiliser, and a ban on exports has had ramifications on avail- able supply. Chart 1 Chart 2 Chart 3