Review of Fertilizer Prices - June 2020
Review of Fertilizer Prices
Although fertilizer prices are at historical lows, there do not seem many catalysts in the near term that will put fertilizer prices higher.
The largest overriding issue in fertilizer is the potential decreased demand this year due to decreased planting in North America. On June 30th
, the United States Department of Agriculture (USDA) released their annual Acreage report that showed that US farmers planted approximately 5 million acres fewer acres of corn compared to the planting intentions released in March. This decreases the potential for fertilizer application and sales of products and will act as an overhang to local fertilizer prices for the foreseeable future.
Nitrogen prices did strength in the period of March to June, but have since backed off given the Acreage Report noted above. In the big picture, the supply and demand continues to remain in balance.
Phosphate did rally in the last quarter as demand from India (and lack of inventory there) did provide some support to the price of this fertilizer.
US urea is now the cheapest in the World also reducing in some price support for North American urea prices.
Potash prices dropped substantially this spring due to price competition between supplier.
As I indicated in my March Fertilizer report, supply and demand continues to deteriorate for fertilizer producers with more supply coming online and demand is not catching up. Until fertilizer companies start to reduce supply, it is difficult to see a floor in the price of potash anytime soon. A key catalyst for a floor in potash is announcements of curtailments or shutdowns of potash mines.
One big picture item that impacts all fertilziers is a draft document relased by the European Commission which indicated the EU may have targets to cut fertiliser use in the European Union over the next decade in order to have the agriculture sector assist with their climate policies.
Overall, what is the outlook for fertilizer? The largest driving factor is acres planted and with 5 million fewer acres planted in America, that will weight on fertilizer for the rest of this year. This, combined with over production of certain fertilizers, should have the fertilizer complex under pressure.
At present, BMO Capital Markets expects fertilizer to remain steady in this quarter. The forecasts are below.
||Average price in 2019
||2020 full year Estimate
||2021 full year Estimate
||New Orleans (cfr)
Source: BMO Capital Markets
Q2 Fertilizer and Chemical Preview – BMO Capital Markets – July 7, 2020
Jackson 5 – June 5, 2020
Jackson 5 – May 22, 2020
US Summer Potash Blues – BMO Capital Markets – June 25, 2020
Inside Agricutulreu – Reuters 0 June 30, 2020