Bearish tones prevail for fertilizer prices

There is a deteriorating trend in the price of fertilizers. That was the main takeaway from Rabobank’s Fertilizer Quarterly Q2 2014 Report.

“Certainly, long-term, we see that trend continuing,” said Larry Davis, vice president and team leader of Rabo Agrifinance’s Central Ohio location. “In the short-term, there is going to be fewer acres of corn in the U.S. and other parts of the world. The result of that is a bearish look for fertilizer prices.”

Also of note, China has exported significant volumes in its high tax season, and phosphate and urea prices will feel downward pressure as China exports even more in its low tax season.

Fertilizer prices in the first quarter of the year were elevated due to supply chain bottlenecks and a compressed application window, but this quarter will see fertilizer prices under lower pressures from fading demand.

According to the report, the first sign of a slow recovery is on the horizon for potash, after a recent collapse in prices. Active supply management will prove to be a challenge, but it is needed to provide price support moving forward. It is, however, unlikely that prices for potash will increase significantly in the short-term due to the low price of potash relative to the soybean price and the likelihood of China accepting much higher prices in the near term.

As for urea, with demand already seasonally low in the second quarter, additional volume from China will force urea prices toward floor price levels. The down trend in urea prices could be reversed if output from Ukraine is reduced through political instability and increasing gas prices here at home. Unrest in the Crimea region has been a significant topic of discussion in fertilizer markets in recent weeks, but the impact has largely been felt in ammonia and not in urea.

“That is certainly a very unstable part of the world,” Davis said. “There could be some other wild cards there that we don’t know about yet and it’s a region that does produce commodities on a large scale so we have to keep a wary eye on the Ukraine for many quarters to come.”

In the U.S., increased sidedressing demand and supply chain filling ahead of autumn application will not be enough to provide significant upside to global fertilizer prices in the second quarter, according to the latest Rabobank report. It states that while this recent demand, due to adverse weather conditions and a shortened application window this spring, could induce producers to direct volumes to the domestic market, impact on exports is likely to be limited.

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