Fertiliser prices have scaled back from the highs of 2021-22, with nitrogen use also well down, as farmers try to cut costs and work within regulations.
A major fertiliser co-operative is wary of the risk of international shifts unsettling the price pattern.
Ballance Agri-Nutrients science strategy manager Warwick Catto said farmers should be watching out for movements in energy prices.
‘‘The manufacturing part of [nitrogen fertilisers] is very energy intensive and so therefore the energy price is what tends to drive the cost of those and in term of non-nitrogenous products it’s supply and demand — what are India and China and those bigger agricultural countries doing? Do they want a lot or not want a lot?’’
‘‘That’s the area where most of the gas comes from and the natural gas is used to make urea and so it’s an important area globally for where urea is made.
‘‘It will impact everything within the primary industry and maybe urea won’t be the main thing, but in terms of price shocks that’s potentially where it could come from.
‘‘What can we do about it? Well nothing really, but those geopolitical shocks are still there like we saw with the Russian invasion [effect] on potassium prices and so we have to have a farming system resilient to those shocks whether it’s a climate shock or another geopolitical shock.’’
He said fertiliser prices had likely come back from supply and demand rebalancing.
‘‘Everyone who was experiencing those high prices and farmers were globally facing those same economic headwinds so when their consumption goes down that’s supply and demand rebalancing because they have been burning off demand because prices are so high.’’
Ballance was in a global market, and global supply and demand ‘‘pretty much’’ dictated domestic prices.
Looking out to the year 2050, there was a risk of competition from hydrogen energy.
Mr Catto was among a speaker lineup at the New Zealand Institute of Agricultural and Horticultural Science’s Canterbury Forum — Nitrogen: Friend or Foe? attended by 150 people at Lincoln University.
During the talk, he warned farmers there was a risk of competition ahead for the key element producing nitrogen as New Zealand works to meet its greenhouse gas emission reduction targets by 2050.
‘‘If you look at the ammonia industry which is what nitrogen is manufactured [in] to then in a net zero 2050 future, most of that demand for ammonia will be from maritime energy and fuel industries and not fertiliser use. So who starts driving supply and demand and pricing dynamics of the fertiliser industry and it may well be the energy market rather than the fertiliser supply and demand.’’
He said the infrastructure and systems were yet to be in place for the hydrogen energy industry, but the forecast was they would be by 2050.
Ammonia was commonly transported around the world so was probably easier for converting to hydrogen without an emissions footprint.
‘‘I guess the main concern for farmers is focus on your legumes first because that’s your cheapest nitrogen you will ever get, and think more about our dependence on nitrogen and how to continue to optimise it.
‘‘This 1% compounding annual productivity improvement — just keep doing that and that will help. And you have to remember that these inputs are globally priced so as long as our cost structure and our productivity is better than our competitors, we will be OK.’’
He said it was difficult to see that far into the future, but the risk could be countered by genertic engineering technology such as nitrogen-fixing cereals or more housed dairying and cut-and-carry operations.
Farmers had lowered their nitrogen use significantly.
‘‘It’s been a substantial reduction, which probably started around 2019 and there’s been a progressive decline.
‘‘Obviously, given the majority of nitrogen — probably 60%-plus —is sold into the dairy industry; that trend is particularly by dairy demand. And the 190 rule [nitrogen cap of limiting synthetic nitrogen fertiliser to grazed pasture to 190 kilograms of nitrogen per hectare per year] has accelerated that, particularly for those who are using high rates.
‘‘Canterbury is one area where there was a large proportion of the high nitrogen users because of the nature of the soils here.’’
Some farmers were up to 300kg/ha with the average for the province was about 150kg/ha.
He said farmers made their nitrogen decisions based on economics, which had been a driver the past two years, and because of regulations.
‘‘Farmers are no different to any other part of the economy; they work within the context that society and the rule book permits them. You’ve had the ECan [Environment Canterbury] rules that have become enforceable down here and you’ve got the Horizons of elsewhere so some of that has brought changes in behaviour.’’
Mr Catto said Ballance had pre-empted this with a lot of nitrogen work starting from the early 2010s based on farmers optimising its use.
He said the company had provided tools for farmers.
‘‘We are a co-operative which means our customers are also our shareholders and given fertiliser is one of their largest items of expenditure, coming up with technology which actually reduces demand for fertiliser is in their interest.
‘‘It may not be in the business interest, but in terms of the co-operative and the wealth of the shareholders it’s in their interests, so that’s why bringing in 190 tools and bringing in urea inhibitors and the soil testing drives lower consumption.’’
New technology includes millions of dollars spent on research, so far with ‘‘little success’’, to get microbes to fix nitrogen or improve nitrogen cycling by inoculating them in the soil.
‘‘We keep trying and someone’s eventually going to crack it and maybe it ultimately ends up a gene-edited type technology, but I would sooner we disrupt ourselves than be disrupted so we spend a lot of time looking for what are our technology opportunities.’’
Fertiliser companies can sell nitrification inhibitors reducing nitrous oxide emissions from urine patches overseas and, until 2011, an inhibitor called dicyandiamide (DCD) was used on some New Zealand farms until the discovery of trace residues in milk led to its withdrawal.
Mr Catto said the export industry did not want contaminants in food and could not afford to have that happen again, even though the residues were harmless.
‘‘We have our fit-for-purpose regulations and we can’t afford to destroy our brand image with contaminants, but if a product is good enough to use in the EU and registered in the EU, why can’t we have some sort of parity?’’
The biggest challenge with having levels of detection so low was developing technology without a ‘‘signature’’ in food or milk. Farmers were relying on scientists to do this and farm systems, such as a withholding period or using a type of class of stock, to make it work, but there would not be a quick fix.
He said another challenge was getting the technology through international food safety standards via the Codex Alimentarius Commission, which sets maximum residue limits.
That could take five to 10 years and cost millions of dollars to do animal trials, depending on the molecule.
Mr Catto said the ‘‘flip-flopping’’ of regulations was disruptive and cross-party support for more strategic policies would provide more certainty for building infrastructure and investing in research and development.
Another challenge was making the government aware that nutrients were needed to produce exports.
A lot of fertiliser elements such as selenium were being seen on the strategic minerals review as industrial elements and not critical for agriculture, he said.
Yet New Zealand soils were deficient in selenium and it was needed for reproductive performance, and boron was needed for pollination in horticultural crops.
A big trend of farmers analysing soils and their fertiliser needs is moving from treating the farm as one block to progressively breaking it down into effluent and non-effluent areas and within paddocks on finer scales.
Technology was allowing them to do that and make efficiency gains, he said.
He said the variability within a farm was huge and the big opportunity for farmers was to exploit it to free up more productivity.
