Fertilizer prices pulled in two directions

Market analysts say the value of fertilizer is being pulled in both directions by opposing market signals.

In the United States, fertilizer transportation has been stymied by flooding on the Mississippi River. If U.S. corn planting quickly gets underway, available fertilizer products could be used up rapidly, causing some short-term tightness in the market, says Chris Lawson, head of fertilizer analysis at CRU Group in London, U.K.

“We’re hearing that there’s shortages of fertilizer and logistics issues already happening in Missouri and Iowa, but the writing was already on the wall in December,” says Moe Agostino, chief commodity strategist at Farms.com Risk Management.

Weather prevented fall applications, and supply and logistics systems would have been heavily taxed to supply farmers trying to catch up in the spring anyway, Agostino points out.

Inputs could find additional price support by an imminent trade deal between the U.S. and China if China significantly increases its American agricultural imports, Agostino notes.

But weather in India may place downward price pressure on the fertilizer complex. Some forecasts for one of the world’s largest fertilizer markets suggests a drier-than-normal monsoon season, which would limit India’s fertilizer demand, Lawson says.

Urea and phosphate

Although urea prices may tick slightly higher over the next couple months on the back of North American seasonal demand, a modest oversupply in the world market is likely to bring values back down again, Lawson predicts.

Although urea prices may tick slightly higher over the next couple months on the back of North American seasonal demand, a modest oversupply in the world market is likely to bring values back down again. Tweet this

Phosphate supplies are also bearish, he says. Much imported product arrived in the U.S. in the early months of 2019 that needs to be absorbed this spring amid some challenging wet conditions, Lawson says.

Some analysts say Canada is also experiencing an oversupply as competitors have imported ahead of Nutrien closing its phosphate plant in Redwater, Alta.

Nutrien’s plans caused supply concerns in Alberta in particular, says Brian Gross, product strategy manager, crop nutrition at UFA Co-operative. But when supply stopped being a problem, prices “dropped like a stone.” Prices in urea also fell, he adds.

China banning Canadian canola has further undermined values and some retailers are selling at below cost to dispose of inventory, Gross states.

FarmLink Marketing Solutions’ Jon Driedger adds there may be some further softening in nitrogen and phosphate prices. 

India and China

After buying heavily over the past year, India has high phosphate stocks and will likely not be prevalent in the market, Lawson says.

Concurrently, greater supply is available from Saudi Arabia and Morocco, pushing the market into a modest oversupply situation, Lawson says. Additional China production cutbacks could help balance the market somewhat in the short-term, he adds.

Bottom line

Issues like weather, spring plant conditions and logistics are driving fertilizer prices up right now around North America, while looming trade agreements between other countries and an anticipated drop in canola acreage this spring is leading to softer prices.

Article by: Richard Kamchen