Adverse weather and logistical bottlenecks led to fertilizer price spikes this spring, but prices are expected to moderate significantly this summer. That’s because increased sidedressing demand and supply-chain filling ahead of fall application will not be enough to provide significant upside to global fertilizer prices, according to a new fertilizer outlook from Rabobank.
"Fertilizer prices in the U.S. will be under downward pressure," the Rabobank report says. "The U.S. fertilizer bubble is bursting, and bearish tones continue to prevail."
The outlook is underscored by China, which influences global fertilizer prices.
"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," the report notes. In the first quarter of 2014, China exported 140% more urea than in the previous year and 289% more DAP. Larger volumes are possible from July onward.
"Ample Chinese urea volumes should cover any loss in Ukrainian volumes; surplus volumes of Chinese urea will continue to flood world markets," the report says.
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Yet Rabobank isn’t ruling out a potential loss in Ukrainian volumes that could create a slightly bullish tone in urea values.
"Unrest in Crimea has been the talk of the town in fertilizer markets in recent weeks, but the impact largely has been felt in ammonia and not in urea," the report says. The future of Ukrainian production remains uncertain because of potentially higher natural gas prices, political instability and lower world fertilizer prices that could force the country to halt fertilizer production.
Even so, Ukrainian fertilizer producers’ switch from urea to ammonia output in May—coupled with more favorable ammonia output at other plants—could further alleviate tightness in ammonia markets. The country accounted for an estimated 6% of world ammonia exports in 2013 and 3.8% of urea exports.
Acreage shifts are expected to adjust input usage in the U.S., where Rabobank forecasts nitrogen demand will decrease 1.5% year over year. Corn acres are expected to decline by 4% and wheat acres by 1% compared to 2013, though the declines will be offset to some extent by a projected increase of 7% in rice acres and 16% in cotton acres.
"Price support in the low season has to originate from wheat farmers that could give a last sidedressing application with UAN or urea to winter wheat crops before harvesting in June-July," the report says.
For potash, a slow recovery is on the horizon after a price collapse in 2013. Significantly higher prices aren’t likely in the short term, however.
"Active supply management is needed to structurally increase price levels," Rabobank notes. "This will prove challenging, especially in the short term, as the global market still faces oversupply."