Fertilizer prices expected to keep falling

Fertilizer prices expected to keep falling

Report indicates U.S. fertilizer market's "bubble bursting."

THERE is a deteriorating trend in the price of fertilizers that is expected to continue in the coming quarter, according to a new report from Rabobank's Food & Agribusiness Research & Advisory group.

The group looked at supply, demand and pricing for urea, phosphate and potash in key international markets, which revealed a bearish outlook through the second quarter of 2014.

U.S. prices in the first quarter were elevated due to supply chain bottlenecks and a compressed application window, but the report suggests that in the second quarter, the U.S. will be under downward price pressure from fading demand.

"Increased side-dressing demand and supply chain filling ahead of the autumn application will not be enough to provide significant upside to global fertilizer prices in (the second quarter)," the report says. "While demand could induce producers to direct volumes to the domestic market, the impact on exports is likely to be limited."

In China, with the domestic application season mostly finished, the demand for phosphates and potassium fertilizers was weakening going into the second quarter, the report notes. An upside in prices appears limited, despite an export window opening in mid-May for phosphates and in July for urea.

"China has exported significant volumes in its high tax season, and phosphate and urea prices will feel downward pressure as China exports even more in its low tax season," the report explains.

Continuing political unrest in the Ukraine could create a limited upside if market sentiment is affected by a rationed supply from the country, according to the report.

"The future of Ukrainian production remains uncertain as potentially increased gas prices, political instability and especially lower world prices could force the country to halt production. To date, the impact mainly has been felt in the already tight ammonia markets," the report says.

As a major player in the global commodity markets, Brazil's desire for higher yields and concerns over its depreciating currency have resulted in strong fertilizer demand and higher prices in the region.

Rabobank said there are signs of a slow recovery in the potash industry following a collapse in prices. According to the report, active supply management is necessary to increase current prices levels, which will prove challenging as the global market is still facing an oversupply.

In the phosphate markets, there is an overall bearish mood due to capped prices in India. Volumes from China will put further pressure on global prices, making it difficult for producers to find premium prices in other regions.

In the urea markets, oversupply and limited demand during the low season were expected to send prices lower in the near future. The report explains that global market participants continue to monitor events in the Ukraine but suggests that, should the Ukraine decide to ration its urea supply, an ample supply from China means the markets shouldn't be significantly affected.

The report shows that events in the Ukraine had the largest impact on ammonia, but some relief was expected after the announcement in May that Ukrainian fertilizer companies were switching output from urea to ammonia (Figure).

Fertilizer prices expected to keep falling

Volume:86 Issue:23

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