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Review of Fertilizer Prices - March 2020

Review of Fertilizer Prices - March 2020


Although we are in an unprecedented pandemic, the overall outlook for fertilizer has not changed very much from when I released my 2020 Outlook.  There are some pandemic plant and mine closures in the fertilizer industry, however, the overall trends in fertilizer do not seem to have changed much. 
Nitrogen demand continues to be steady and supply and demand continues to remain in balance.  Urea has its typically rallies in the first quarter of the year and then looks to fall back to in the second and third quarter.  In the last two years, urea typically finds a bottom at the $200 short ton level and there is no reason why that should not occur again this year.[1]  Possibly the biggest issue facing the nitrogen market is the 2021 demand if corn economics continue as they have been presented this Spring.  Perdue University has estimated that there is a $60 an acre advantages to planting soybeans this year.[2]  If there is approximately 95 million acres of corn produced this year and at a trend line yield, there will a massive carryout of US corn and lower prices in 2021.  That can lead to lower corn plantings and lower nitrogen needs (and presumably) lower prices in 2021.

Potash prices have continued to decline as there is more supply of the product than demand.  This has been the trend for the past 18 months (or so).  There has been one potash mine closed (ICL has closed their Spanish operations) due to the COVID 19 pandemic  however there would have to be more discipline by producers inorder to have the price increase.[3]

Phosphate has been impacted by the COVID 19 pandemic with Indian DAP/MAP production running 15%-20% of capacity.[4]  Many producers are also looking at limiting the amount of phosphate they apply this year due to poor economics which could also lead to phosphate prices falling.[5]

Overall, what is the outlook for fertilizer?  With poor economics for farmers being forecasted this year, it is likely we will see lower prices in the fertilizer market this year given farmers will be making economic decision.  This is especially prevalent in the potash area where there has been over supply for over a year.  It is likely that we will see lower fertilizer prices as we go into the next quarter.

At present, BMO Capital Markets expects fertilizer to remain steady this year.  The forecasts are below. 
Product Location Quantity Average price in 2019 Q4/19 Price Q1/20 Price Q2/20 Estimate 2020  full year Estimate Q3/20 Estimate Q4/20 Estimate 2021  full year Estimate
Ammonia Tampa (cfr) Mt 248 255 250 233 241 222 230 263
UAN New Orleans (cfr) ston 162 145 130 150 142 145 145 165
Urea Midwest (fob) ston 301 263 273 295 292 290 310 303
DAP Midwest (fob) ston 343 282 298 320 313 320 330 333
Potash Midwest (fob) ston 301 282 262 255 257 250 260 265
Source: BMO Capital Markets
[1] Jackson 5 – BMO Capital Markets – April 24, 2020
[3] Jackson 5 – BMO Capital Markets – March 27, 2020
[4] ibid
[5] BMO Sprign Ag Outlook Call – April 3, 2020