Global Fertilizer Prices Affected by Currency Changes

March 19, 2015 06:42 AM
Global Fertilizer Prices Affected by Currency Changes

India, the world’s second-largest producer of rice and wheat, may win a price freeze on potash imports this year after a gain in the dollar pushed the cost of the fertilizer beyond the means of local farmers.

“Big currency moves historically affect India’s potash appetite,” Jason Miner, an analyst at Bloomberg Intelligence in Skillman, New Jersey, said by e-mail. Producers of the soil nutrient will have a “challenge to achieving a price rise,” he said.

India, with no potash of its own, bought more than 4 million metric tons last year, almost 1 million tons more than in 2013, to expand yields of fruits, vegetables, sugar cane, tea and grains. The rupee last year depreciated 16 percent against the dollar, which is used globally to price the fertilizer.

PAO Uralkali, the world’s biggest potash producer, said currency moves are a concern for the industry.

“This currency risk is significant and we expect it may impact consumption in 2015,” Chief Financial Officer Anton Vishanenko said on a conference call this month.

Uralkali said in February that India may agree on a potash supply accord this year ahead of China, the first time it’s clinched a deal before its northern neighbor since 2008. That would allow India, which paid $322 a ton under last year’s contracts, to set the benchmark price for the market.

The supply agreements fix the same price for all producers. India’s government also subsidizes potash imports, aiding buyers such as Indian Potash Ltd., which expects the subsidy to remain at 9,300 rupees ($148) a ton, Managing Director P.S. Gahlaut said Feb. 5. Indian buyers will resist any price increase, he said.

This will be a “tough year for the producers,” said Elena Sakhnova, a Moscow-based analyst at VTB Capital, citing possible delays to a China deal and the likelihood that Belarus will supply India at last year’s price.

Global potash demand will fall at least 5 percent in 2015, driving up competition and putting pressure on prices, Credit Suisse Group AG said Monday.

China, the world’s largest producer of rice and wheat, is also the biggest consumer of potash.


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