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2020 Fertilizer Outlook

2020 Fertilizer Outlook
After a year where fertilizer largely declined for most of the year, difficulty in planting crops and poor application seasons in the Spring and the Fall, does it look like fertilizer will rebound higher in 2020?

Although I could see a constructive environment for agriculture inputs after a very challenging 2019, I would think that all of this information is already reflected in fertilizer prices.  As long as the ground is fit, the US farmer will want to plant as much corn as possible given the profit potential of an excellent crop of corn verses an excellent crop of soybeans, the ongoing trade tensions with China (Phase 1 covered the easy to agree to items) and a desire to get back to rotations after a difficult planting season last year.  It would not surprise me to see 94 million acres of corn planted in 2020 and possibly more.

Although we should be expecting a demand increase in 2020, inventories of various fertilizers are high, including potash.  Although volume was cut in 2019 by potash producers, both volume and price fell last year.[1]  Potash prices could drift lower in the first half of 2020 as global supply and demand is not yet in balance yet.  There are new mines scheduled to come online in 2020 (between 3-4.5 million metric tons of supply) which might also pressure potash prices.[2]

The Nitrogen market is broadly in balance with respect to supply and demand.  It would not be a surprise to see urea prices increase back to 2018 levels.[3]  Chinese urea exports are not expected to increase and Indian demand for urea is strong (due to an above average monsoon season).[4]  There is an anticipated 3.5 million metric tons of urea capacity scheduled to come online in 2020, but the new supply will comes from unpredictable areas like Nigeria, Iran and India where issues such as gas availability, trade sanctions can cause delays.[5] 

Phosphates may stabilize in 2020, despite the fact that Chinese domestic demand has decreased for the past 5 years and is likely to fall again in 2020 (leading to more Chinese exports).[6]  It is also not clear that producers of phosphates will be able to have the discipline to curtail production which would increase prices.   In fact, the phosphate market seems well supplied over the course of 2020 and if any weather issues are forecasted, a fall in the price of phosphate fertilizer is not out of the question.

Overall, what is the outlook for fertilizer?  Other than nitrogen (where the supply and demand is largely balanced), there appears to be large supplies for the other fertilizers.  Although demand is anticipated to increase (assuming a “regular” or normal spring season), there is production coming online in these commodities.  It would not surprise me to see lower fertilizer pries, not withstanding a substantial increase in corn acreage in 2020.
[1] 2020 Fertilizers and Chemicals Preview – BMO Capital Markets – December 19, 2019
[2] Ibid
[3] Ibid
[4] Ibid
[5] Ibid
[6] Ibid