Fertilizer prices have been on a steady climb, despite grain prices continuing to lag. Josh Linville, vice president of fertilizer at Stone X points to the driving force: Global production is lagging behind demand.
“Normally when grain prices are down that shuts down demand,” he says. “The issue that we’re running with too many of these markets is — and it has been a long-term situation — global production has failed to keep up with global demand.”
In short, Linville says the year ahead of fertilizer prices will challenge farmer profitability.
Global production is so tight he isn’t forecasting any significant increases to nitrogen, phosphates or potash.
“If you have something that goes down, there’s no production in the wings waiting to save it so the markets are basically trying to kill demand out there and they’re trying to get their price high enough to where the farmer says ‘yeah, no thanks,’” he says. “But that just balances it and causes it to stop going higher, rather than go lower.”
Is there light at the end of the tunnel?
Linville says yes, but for now, the five biggest urea exporters are countries either in war, effected by neighboring wars or having other issues.
“Russia was our biggest exporter last year,” he says. “Well, Ukraine struck a Russian nitrogen production facility. Now I still think that they attacked it because of their nitrate production capabilities, but it doesn’t matter. It took out urea.”
Qatar is the second largest urea exporter, and with its proximity to Iran and reliance on the Persian Gulf, it’s supplies are on watch.
“Number three and four are Iran and Egypt,” he says. “Iran is offline fully because they shut down the gas fields because of the Isreali attacks. Egypt has been on Israeli gas, which they had shut down, because Israel shut down their gas.”
China is the fifth largest exporter, and its contribution to the global market has varied. While normally, the country exports 5 million tons, last year they exported 262,000 tons, but this year that is expected to total up to 2 million tons.
“Last week, New Orleans urea traded at $345 to $350 a ton,” Linville says. “The most recent barge I saw traded was between $415 and $425 ton. It’s gotten heated.”
