The rapid onset of winter has a lot of people looking at what may be happening in the world of fertilizer. Spring is coming and a new report from Rabobank shows that fertilizer supply may outweigh demand. The bank reports that the forecast for the first quarter of 2015 looks "cloudy in terms of pricing." While spring demand in the Northern Hemisphere will prevent prices from slipping significantly, the bank believes that lower farmer margins will "incent farmers to be more prudent in fertilizer application, but a strong demand destruction is unlikely."
The report was issued by Rabobank's Food & Agribusiness Research and Advisory Group. It shows an increase in urea supply in the first quarter of 2015 that will set the tone for global urea prices. With new capacity coming on stream in Algeria and Egypt combined with a change in a Chinese export tariff, and the urea supply picture looks to be heavier than demand.
That Chinese news could mean even more urea available. Suzanne Pera, Rabobank analyst, comments: "Chinese urea export availability could improve by another 10 to 15% in [fiscal year] 2015, as China seems very close to abolishing its policy of separate tax windows. This would amount to 11.6 to 12.1 million tons based on FY 2015."
Rabobank notes that spring demand in the Northern Hemisphere could set a floor under the urea price, which would prevent prices from slipping significantly. In addition spring demand in the region would normally provide an upside for phosphates, as well when "combined with supply management." However the new Chinese tax policy for DAP will provide downside. This may offer an opportunity to lock in pricing.
The report notes that price pressures in the U.S. could cut potash use as much as 5% in 2015, which would put a lid on further price increases for this input.