Weekly Fertiliser Update: Week 10

Farmers around the world received support in their quest for lower fertiliser prices, as another bullish argument in the global fertiliser market disappeared February 28. A roll-over of India’s fertiliser budget into its new fiscal year starting April 1 and the delayed restructuring of its urea subsidies will likely limit opportunities for global fertiliser manufacturers to increase Indian prices, thereby further limiting upside in global fertiliser markets.

The rhetoric of potash and phosphate suppliers—that improved demand for their products would lend opportunities to price increases in their negotiations in India—has been hollowed out by the presentation of India’s Union Budget last Saturday. As such, an important counterweight in a global fertiliser market dominated by bearish arguments disappeared. The chances that increasing Indian contract prices will stop—or even turn—the trend of declining fertiliser prices in important import hubs around the world are now decreasing. As of last week, fertiliser prices in global markets continued to slide. Lower replacement costs upstream will ultimately put pressure on fertiliser prices at the farmgate, but the extent to which farmers benefit in the upcoming spring applications differs between the US, Europe and China.

As Indian farming remains under pressure, the government backed away from plans to restructure subsidies that benefit farmers. The delay of expected changes to India’s fertiliser subsidy programme that would address unbalanced fertiliser application (i.e. farmers favouring highly subsidised urea over less subsidised phosphate and potash) will especially disappoint the global phosphate and potash producers. Increased phosphates and potash demand driven by structural changes to India’s fertiliser subsidy programme that would shift farmer spending away from nitrogen, and/or higher prices relative to urea resulting from an increase in the fertiliser budget will continue to be an eagerly awaited scenario instead of the reality.

India’s fertiliser budget will increase from INR 710 billion (USD 11.5 billion) in fiscal year 2014/15 to INR 720 billion (USD 11.8 billion) in fiscal year 2015/16. Within the 2015/16 budget, the Indian government has allocated INR 382 billion (USD 5.3 billion) for domestic urea and INR 123 billion (USD 2 billion) for imported urea. The balance—INR 225 billion (USD 3.6 billion)—is earmarked for phosphate and potash fertilisers. Compared to last year’s budget, the allocation was increased 1.7 percent for imported urea and 8.7 percent for phosphates and potash combined, whereas the allocation for domestic urea was kept stable.

Download a PDF version of this article

> Click here to download <