Will fertiliser scarcity harm farm economy?

01:04, Aug 28 2009

About 45 kilometres out of Napier on the way to Taupo you'll get to a place called Te Pohue, solid sheep and beef farming territory. The land's not suited to other more intensive uses, so sheep and beef it is.

Te Pohue is where Bruce Wills farms and he, like others in the district, has drastically reduced his sheep flock. With fewer numbers, Wills can achieve a heavier ewe and command a better price at market.

Beef, says Wills, who is a  Federated Farmers' meat spokesman, is a little easier on the land and back pocket in terms of irrigation and other costs,  a particular concern after many lean years. Water is always an issue on the East Coast, but three years of drought has made it particularly acute.

All the more need, then, for fertiliser. All farms need fertiliser, but hilly, water-starved country like Te Pohue, which struggles to achieve the output of the lush lowland paddocks of Southland, Waikato and Taranaki, needs the stuff more than most.

Wills won't fertilise his fields this year. At $392 a tonne for superphosphate, it's unaffordable. To put that in perspective, in April last year it was $261 a tonne. For Wills, it's uneconomic to fertilise until superphosphate drops below $300.

About 45 kilometres out of Napier on the way to Taupo you'll get to a place called Te Pohue, solid sheep and beef farming territory. The land's not suited to other more intensive uses, so sheep and beef it is.

Te Pohue is where Bruce Wills farms and he, like others in the district, has drastically reduced his sheep flock. With fewer numbers, Wills can achieve a heavier ewe and command a better price at market.

Beef, says Wills, who is a  Federated Farmers' meat spokesman, is a little easier on the land and back pocket in terms of irrigation and other costs,  a particular concern after many lean years. Water is always an issue on the East Coast, but three years of drought has made it particularly acute.

All the more need, then, for fertiliser. All farms need fertiliser, but hilly, water-starved country like Te Pohue, which struggles to achieve the output of the lush lowland paddocks of Southland, Waikato and Taranaki, needs the stuff more than most.

Wills won't fertilise his fields this year. At $392 a tonne for superphosphate, it's unaffordable. To put that in perspective, in April last year it was $261 a tonne. For Wills, it's uneconomic to fertilise until superphosphate drops below $300.

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He freely acknowledges he's running a risk. If Wills skips fertilisation for longer than one or two years, he risks significant damage to his fields, the engine room of his farm. Most other farmers around the country, according to agricultural analysts, are making similarly hard decisions.

Driving the price rises is resource scarcity, global demand for food (particularly among the rising Asian middle class) and growing thirst for alternative energy sources. Increased production demands greater fertiliser use.

Before the financial crisis, buying a tonne of fertiliser ingredient diammonium phosphate (DAP) would set you back more than an ounce of gold. DAP, which peaked at more than US$1200, and urea prices have since fallen but this has yet to feed through into the cost of market fertiliser. Manufacturers have scaled back production, stabilising prices, but potash is still at elevated levels, according to the Rabobank Agribusiness Review.

Wills may get his wish of superphosphate for less than $300 a tonne next year, but that price is unlikely to stay low in the medium to long term. Demand, strangled by high prices and financial distress, may be manageable but scarcity isn't.

A fascinating but alarmist piece in Scientific American by David Vacari, a US agricultural scientist, points to a looming crisis in production of phosphate, which comprises about 12 per cent of every bag of fertiliser. Vacari writes like a true Green believer, but the bare bones of his narrative is worth a read and justifies his alarmist language.

Nearly a third of global phosphate production is mined. The world's biggest producer is China, followed by the US. More than 10 per cent of global mined production comes from pits in Tampa, Florida, which have a shelf life of only 20 to 30 years. Other major producers are South Africa and Morocco. The North African country holds 40 per cent of world reserves, making it (hilariously) the ''Saudi Arabia of phosphorus''.

''Although Morocco is a stable, friendly nation, the imbalance makes phosphorus a geo-strategic time bomb,'' writes Vacari. Blimey. Maybe he's right but I can't see the US invading Morocco on the false premise of weapons of mass destruction, no matter how high the price of fertiliser goes.

But Vacari's point about phosphorus scarcity making peak oil seem a distant prospect is well made. Recoverable reserves of phosphate are 15 trillion tonnes, about enough to last a reassuring 90 years at today's rate of consumption.

The world's food and energy sectors, however, are chewing up the stuff. A UN report points to bio-fuel production, which will displace 21 million hectares of food crops by 2018 when an extra 70 million mouths will need to be fed.

The UN is estimating an annual global increase in fertiliser use of 1.7 per cent in the next three years. But it concedes that global politics, bio-fuel production and other unknowable factors make its prediction guesswork and, possibly, on the conservative side.

Already, the world's second-biggest producer of phosphate, the US, is importing the stuff, presumably from Morocco because China, cognisant of its own exponentially expanding fertiliser needs, has slapped a high impost on exports.

New Zealand, apart from a tiny urea plant Ballance Agri-Nutrients operates out of Kapuni, Taranaki, imports all its fertiliser ingredients. Widespread Energy is investigating mining prospects on the Chatham Rise, 600km off the Canterbury coast.  Featherston Resources, which mines diatomite near Dunedin, hopes to bring a local fertiliser to market later this year. But that's it.

Farmers looking for a silver lining will find none. In the short term, the price of superphospate will drop but longer term, persistent high prices seem a certainty.