Senator Matt Canavan was asking questions of DAFF officials this week around access to the Fuel and Fertiliser Security Facilility. Image – Australian Parliament House Streaming Portal

THE FEDERAL Government’s extension of financial support to just two of Australia’s many fertiliser importers came under scrutiny last week from within and outside the fertiliser industry.

As part of the $7.5-billion Fuel and Fertiliser Security Facility, Incitec Pivot Limited and CSBP are so far the only two fertiliser companies which have had access to Export Finance Australia, the Federal Government’s export credit agency.

Both are tied to ASX-listed companies, Incitec Pivot through Ridley Corporation, and CSBP through Wesfarmers Limited.

The matter was raised by the Rural and Regional Affairs and Transport Committee in Senate Estimates this week, and fertiliser companies including Marnco are also lobbying the government to allow broader access to EFA, and quickly.

The push is coming in a week where rain has consolidated the seasonal outlook for Western Australian, South Australian and Victorian growers, and improved planting and establishment prospects markedly in New South Wales and southern Queensland.

This means growers from coast to coast will be chasing urea to top-dress crops over winter in a world market still scrambling for product as a result of the ongoing closure of the Strait of Hormuz.

Grain Central has heard that some fertiliser companies are already struggling to compete with more competitively priced product coming through the EFA channels, which has created a two-tiered market for both wholesalers and growers.

Other suppliers being considered: DAFF

Speaking in Senate Estimates last week, Department of Agriculture, Fisheries and Forestry first assistant secretary Christie Sawczuk said six urea cargoes totalling 209,000 tonnes have been imported under FFSF.

“All of those six shipments are for Wesfarmers and Incitec Pivot,” Ms Sawczuk told the committee, which included Senator Matt Canavan, who asked if any other companies were involved in the supply chain.

“Export Finance Australia is currently looking at commercial terms with a number of other suppliers at the moment,” Ms Sawczuk answered.

She said “competition is a really critical part of the facility”, and that the Australian Competition and Consumer Commission has been involved in the Federal Government’s conversations around the FFSF policy.

“The Fertiliser Supply Working Group…is meeting weekly…and is a part of all those conversations.”

Mr Canavan pressed on.

“It does give those with access a competitive advantage, does it not?”

Ms Sawczuk said it would not give them a competitive or “first-mover advantage”.

“It is a price-support mechanism which is really about supply and shoring up supply during the current crisis situation.”

Ms Sawczuk was referring to the US-Iran conflict, which has throttled the supply of urea coming out of the Persian Gulf, typically the source of around 60 percent of the world’s supply.

Mr Canavan then asked why the government was underwriting supply, and why CSBP and Incitec were receiving “a leg up”.

DAFF deputy secretary Matt Lowe told the committee the FFSF was an innovation in the national interest.

“This is the first time a facility like this has been set up for fuel or fertiliser or any input as I understand,” Mr Lowe said.

He said prioritisation of eligibility factored in each applicant’s track record of importing fertiliser to Australia.

That included areas such as biosecurity compliance, ability to secure cargoes from diverse international suppliers on economically feasible terms, and “the ability to import and distribute cargoes at scale because we are talking about a significant gap in terms of fertiliser supply”.

While CSBP and Incitec Pivot “are the two first”, Mr Lowe indicated they would not be the only.

“It’s absolutely our intention and EFA is working around the clock to ensure there is more fertiliser importers supported by the facility.

“It’s in the national interest for the Australian agricultural sector to have as many companies as possible who meet that criteria chasing fertiliser on behalf of Australian agriculture.”

Mr Lowe said DAFF understood a number of companies would soon be signed up with the EFA facility.

“We have got consideration around how those companies could be supported to give them comfort to chase fertiliser on the international market as well.”

Senator Ross Cadell told the hearing that an importer had advised they “can’t even get a call back from the EFA about the process on this”, and voiced broader concerns.

“If we are supplying a couple of big guys an advantage, the smaller guys are out of the market long-term,” Mr Cadell said.

“From a policy point of view, we want to be supporting these cargoes for the shortest time as possible for government to be in the market in this way.”

Marnco states its case

Marnco imports and distributes roughly 500,000 tonnes of fertiliser per annum, and its managing director Mark Been has this week written to Prime Minister Anthony Albanese about the company’s inability to secure EFA support “despite meeting every published eligibility criterion”.

FFSF was announced on April 22 in response to the fuel and fertiliser shortages affecting Australia because of the Persian Gulf conflict, and Mr Been’s letter said Marnco has been seeking to participate since early May.

Following is an excerpt from the letter, which requests an “urgent meeting with DAFF” and engagement with EFA” to progress Marnco’s participation.

“For importers like Marnco that are not included, the impact is not merely competitive. It goes to the viability of our business.

When competing importers receive government price-risk support and we do not, we cannot commit to shipments on comparable terms.

“The selective application of a price-risk mechanism also undermines the value of inventory already held by non-participating importers and their customers.

Businesses throughout our supply chain have purchased and are holding fertiliser at current market prices, bearing full market risk.

When Government-supported competitors bring in new shipments with downside protection, it puts pressure on the value of that existing inventory, causing real financial harm to importers, resellers and distributors who purchased in good faith at prevailing prices.

We also note that one of the companies participating in the scheme has recently begun offering discounted fertiliser pricing into the market.

Without making any allegation of improper conduct, there is currently no visibility on how the price-risk mechanism operates in practice. It is reasonable to ask whether that discounting is being enabled or funded, in whole or in part, by taxpayer-backed price-risk support.

Without transparency, it is impossible for the market, other importers, or farmers to know whether the pricing they are seeing reflects genuine competition or a Government-funded differential.

Fewer importers means less competition, reduced supply diversity, and ultimately higher prices and less certainty for farmers, resellers and regional communities. A more inclusive approach to the FFSF would deliver more fertiliser through more channels and better serve the national interest.

Marnco is ready and willing to contribute to Australia’s fertiliser supply security. We respectfully request that your Government ensure eligible importers are given a fair and timely opportunity to participate.”

Grain Central: Get our free news straight to your inbox – Click here