Review of Fertilizer Prices - June 2021

Review of Fertilizer Prices – June 2021

Overview

Fertilizer prices are expected to fall as we go into the 3^rd and 4^th 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