Fertiliser prices have fallen from their record highs in 2022, with urea now worth about a third of its price last year.
Urea is the world's most commonly used nitrogen fertiliser and according to CRU analyst Chris Lawson, the price is now back to levels seen prior to Russia's invasion of Ukraine.
"Some urea price benchmarks went over $US1,000 ($1,511) a tonne last year, but in the past 12 months we've seen them fall drastically to below $US300 ($453) a tonne," he told ABC Landline.
Mr Lawson said one of the key reasons was the falling international price for natural gas, which had made it cheaper to produce urea.
"There's also been ample supply in the market," he said.
"We've seen a lot of producers incentivised to ramp up their production and we're still seeing ample supply out of Russia as well; they haven't been sanctioned when it comes to fertiliser production and exports."
The outlook for fertiliser prices was encouraging for farmers, but some volatility in the market would likely remain, Mr Lawson added.
"We do think we're pretty close to a floor in nitrogen pricing now.
"We definitely don't see prices shooting back up to $US900 a tonne again; that's incredibly unlikely."
Why this matters for shoppers
Falling fertiliser prices are obviously good news for farmers, who do not have to fork out record money for a key input.
Mr Lawson said the grain-to-fertiliser-price ratio was now "very favourable" for Australian growers.
Shoppers should also see the benefits of the urea price slide, he said.
"Fertiliser is a surprisingly important commodity and is one of the key drivers in how crops perform and reach optimum yields.
"So when fertiliser prices are high, there's a reluctance from farmers to buy those fertilisers, which means you don't reach the optimum yield and therefore food prices can rise as a result of that."
Australian-made urea
Australia imports around 90 per cent of its urea, which equates to about 2.4 million tonnes per year.
But that reliance on imports could be coming to an end thanks to a new urea manufacturing plant being built in Western Australia's Pilbara region.
The official sod-turning took place this week at the $6 billion Perdaman project near Karratha.
The facility is expected to start supplying urea from mid-2027.
Incitec Pivot (IPL) has already signed an exclusive 20-year deal with Perdaman to take up to 2.3 million tonnes per year.
In a statement, IPL said up to 50 per cent of the urea it would receive from the facility was expected to be marketed within Australia, with the remainder marketed to key export destinations.
"We are pleased to partner in a major Australian project that utilises the country's natural gas resources for domestic urea manufacturing operations that is essential for the future of our Australian and international agricultural markets," managing director Jeanne Johns said.
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