Weekly Fertiliser Update: Week 11

Fertiliser prices continued their slide in the global markets last week, but the question still remains as to whether farmers in the Northern Hemisphere will see lower price postings from their retailers in the coming weeks. However, there is an increasing likelihood of lower farmgate fertiliser prices as fertiliser demand indications point towards lower spring applications.


The actual size of fertiliser demand for the upcoming spring application will ultimately determine farmgate prices in North America, Europe and China. Lower than expected demand might force global traders, regional wholesalers and local retailers to at least transfer some of their anticipated margins to farmers, as stronger competition at the farmgate will intensify competition among supply chain operators. High demand will likely prevent these supply chain operators from giving up the anticipated margins of fertiliser positions they have built up over the last weeks… and that they will continue to build in the coming weeks.

Farmers in the Northern Hemisphere are more likely to carefully assess their fertiliser purchase volumes. Farming margins in North America and Europe will continue to decrease, a continuing depreciating euro will render imported fertilisers expensive, and prolonged winter weather in the US will increase the likelihood of a normal spring application window, as opposed to the longer application window anticipated earlier this year. Therefore, the oversupplied global fertiliser market will find limited relief from the upcoming spring demand in the Northern Hemisphere, and, as such, competitive pressure will be forced downstream in the fertiliser supply chains. European and Chinese farmers are likely to benefit more, as their farms are more closely located to the world’s main fertiliser production areas. That’s why they have more exposure to the global markets: transportation times to European and Chinese markets are shorter.

The oversupply situation is most pronounced in the nitrogen fertiliser complex. Ample availability of urea in most of the production areas—coupled with signs that China will not shift its export machine into a lower gear this year—continues to put pressure on forward positions. As stated above, whatever share of the short positions’ anticipated margins the global traders are currently building has to be transferred downstream depends on the upcoming spring application demand. Ammonia and nitrate markets are tighter than the urea market. Potash price directions still hinge on the outcome of 1H 2015 price negotiations with China, but each day the negotiations linger, a roll-over of the 2014 price seems more likely. Significant weakening of the phosphate market in China and Brazil will increase the negotiation power of the global farming community.

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