A mid-year report by Rabobank's Food and Agribusiness Research and Advisory analysts indicates that global fertilizer demand has been softening, at least for the near-term due to a number of factors. Another slow-down in the U.S. and China economies, plus new economic concerns in Brazil and India, continuing troubles in the Eurozone are raising "macroeconomic headwinds."
That, plus the after-effects of the U.S. drought, suggest reduced phosphate and potash demand for the 2013 U.S. growing season. (Unused P and K soil reserves on drought-busted corn and soybean ground, for instance, will carry over.)
For now, Rabobank analysts expect bearish tones to dominate global fertilizer markets. But phosphate is the wildcard. Several factors on the horizon, especially Indian import demand, will be crucial in setting price direction.
Much keys on 2012 U.S. crop
Ultimately, corn and soybean economics will underpin fertilizer prices. China exports of phosphate and nitrogen will ramp up if grain prices stay strong. That would ease some of the market tightness on both, particularly as new N and P production capacity cranks up yet this year.
As you might expect, nitrogen may be the most volatile market. Rabobank expects Chinese urea exports to kick in substantially during August and September.
Global diammonium phosphate prices have stayed relatively firm due to rising production costs as prices for key input materials (ammonia and sulfur) spiked during second-quarter. Despite the cost pressures, DAP exports from China and Saudi Arabia should prevent any major price rallies.
The analysts also point out that U.S. potash inventories in key markets are still quite high. After early spring spreading was over, April North American volumes were 31% higher than for the same time in 2011.
You also need to know that Rabobank analysts expect corn prices to decline during third-quarter 2013, but not soybeans and wheat. While crop economics support robust fertilizer application rates, they predict farmers will stay cautious as long as global macroeconomic uncertainty prevails.