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Review of Fertilizer Prices - June 2021

Review of Fertilizer Prices – June 2021

Overview

Fertilizer prices are expected to fall as we go into the 3rd and 4th quarter.  We have been witnessing surge pricing as farmer profitability is extremely strong.  It is likely we have seen the high prices in fertilizer for this cycle.

Biggest overall driver

The biggest driver for fertilizer prices has been farmer demand due to high prices seen in corn, soybeans and wheat.  However, it is likely we have seen the peak for fertilizer prices this cycle and will see it move lower.

Issue driving nitrogen

The biggest issue in nitrogen is the strong demand.  We have seen prices skyrocket this year and the cost structure has also increased as natural gas and Chinese coal prices have increased.[1]  Overall, the supply and demand appears to be generally inline however, prices may not fall greatly as the cost for producing nitrogen has increased.

Issue driving Potash

The biggest issue in the Potash complex has been Mosaic production issues.  Potash has been hitting highs based on crop strength, strong farmer economics higher ocean freight and a delay of start up of a plan in Europe.  Mosaic also announced 1 million tonnes of lost production from early closures at plants.[2]

Going into the end of the year and into next year, the Supply and Demand picture for potash looks broadly in balance and prices should moderate.

Issue driving Phosphate

The biggest issue in the Phosphate complex has been the countervailing duties against Russian and Moroccan phosphate import which were finalized in March of this year.  This has had the impact of raising prices around the World and in particular North America.

There are no any phosphate capacity increases this year and higher prices have started to cub demand.[3]  It is likely we will see lower prices in the second half of 2021.

Closing

We have witnessed substantial increases in the price of fertilizer this year.  Although demand will most likely moderate as we go into next year, prices could remain elevated as the cost structure for some of the fertilizer complex have increased (i.e. natural gas).
 
Source: BMO Capital Markets – June 28, 2021
Product Location Quantity Average price in 2020 Q2/21 Price Q3/21 Estimate Q4/21 Estimate 2021 full year Estimate Q1/22 Estimate Q2/22 Estimate 2022 full year Estimate
Ammonia Tampa (cfr) Mt 233 542 533 430 463 375 400 358
UAN New Orleans (cfr) ston 129 297 235 235 244 225 225 198
Urea Midwest (fob) ston 272 438 380 380 394 380 340 339
DAP Midwest (fob) ston 348 606 575 520 556 495 475 468
Potash Midwest (fob) ston 255 394 450 425 402 375 350 344
 
 
[1] Q3 Preview – BMO Capital Markets – Joel Jackson – June 28, 2021
[2] Ibid
[3] Ibib