Key Points:

New Zealand farmers are braced for big increases in the price of fertiliser that have already curbed food production around the world.

The international cost of fertiliser is soaring because of the rising demand for food, a switch to biofuel and a lag in production of key chemicals.

Fertiliser supplier Ballance Agri-Nutrients head of business development Peter Mourits said farmers could expect the price of superphosphate to rise from about $270 a tonne to more than $400 this year. A year ago superphosphate cost about $190 a tonne, although local price rises had not reflected the global increase.

Mourits said: "Superphosphate pricing in New Zealand at the moment is probably the lowest globally."

Statistics New Zealand said the amount of superphosphate used in New Zealand increased from 541,557 tonnes in 1986 to 1.26 million tonnes in 2006.

Sulphur and phosphate rock - the two main ingredients of super phosphate - had risen from about US$45 ($58) and US$50 a tonne respectively at the start of last year to spot market prices of US$600 and US$300 a tonne or more, Mourits said.

"India and China and the increased consumption of protein and the increased food consumption there is a major driver and it's just going to take the global fertiliser or mining industry some time to be able to increase its production capabilities to meet the increase in demand."

There was no shortage of raw material reserves and new facilities were being planned, including a new phosphate mine in Morocco, Mourits said.

"But you're talking three to five years from the time of design to implementation and that sort of thing before that new mine comes on board."

Ballance expected New Zealand farmers would use less fertiliser, affecting productivity, and the company planned to give farmers a better understanding of the global factors.

"Because these are unprecedented price increases, we've never seen anything like this in New Zealand farming history."

Federated Farmers fertiliser spokesman Andrew Gillanders said farmers were watching closely, especially in the sheep and beef sector.

Farmers had trouble passing costs on and as the price of fertiliser increased they would have to decide whether to cut back on production.

"A lot of sheep and beef farmers have reached that point because of the low returns that they are receiving," Gillanders said.

"It could have a dramatic affect on the cropping farmer because those that have signed contracts have no way of recouping these prices."

Fertiliser supplier Ravensdown chief executive Rodney Green said China had raised its export tariffs for fertiliser products from 35 per cent to 135 per cent - effective from April 20 to September 30.

In April New Zealand signed a much vaunted free trade agreement with China.

"We think that there is a couple of lines in that free trade agreement which should give us some hope that the free trade agreement could mean that those export tax should not apply to New Zealand."

But the gross margin over fertiliser for many agricultural products was significantly better than a few years ago.

"I think the farmer has to reflect on what he would most like ... low prices for their product and low fertiliser prices or high prices for the product and high fertiliser prices," Green said.

"It's imperative that New Zealand understands this."

New Zealand should be seeing a golden age for agriculture, he said.

" Fertiliser prices are demand driven - they're driven up because the cost of food has gone up and if you're a food exporting nation and the cost of food's going up you should be doing extremely well."

PUSHING UP
THE COST

* The price of sulphur has increased more than 13 fold to US$600 a tonne since the start of 2007.
* Demand for food and biofuel is driving up fertiliser prices.
* Increasing manufacturing could take years to come on board.