CNS Canada –– Relatively cheap natural gas has helped push down fertilizer prices for Canadian farmers over the past winter, but that should change by springtime.
One Manitoba farm leader noted urea fertilizer that went for $545 per tonne last August could now be acquired for $445 per tonne.
“Phosphate fertilizer was going for $721 per tonne in August, now it’s $692,” said Dan Mazier, president of Keystone Agricultural Producers.
At the same time, he said, fertilizer hasn’t copied the price movement seen in grains and oilseeds.
“Prices haven’t softened anywhere near to what the crops have softened,” he said.
Still, he said he expects usage to remain relatively unchanged for this crop year.
Fertilizer, he said, is one of those things you “don’t cut back on too much,” unless you’re growing a crop of lesser value.
A fertilizer market expert south of the border agrees natural gas is behind much of the downward price pressure on fertilizer.
“Most of the world’s fertilizer, particularly nitrogen, is based on natural gas,” said David Asbridge, president and senior economist of NPK Fertilizer Advisory Service in Missouri.
The market is supply-driven right now, and will take two to three years to stabilize, he said.
While Chinese fertilizer producers on the coast are able to compete right now, companies further inland are having trouble and have scaled back their activity.
“So the supply is beginning to get a little more limited and we think that again, over the next two to three years it will pull prices back up into a new cycle,” he said.
In the short term, he said, he believes nitrogen prices have “just about bottomed out” in North America.
Some products such as urea are also at price levels not seen since 2007, he said.
However, as spring approaches, farmers in the southern U.S. will begin to eat into supplies, followed by producers in the U.S. Midwest and eventually in Canada.
“We’re expecting to see prices (in the U.S. market) across the board get stronger between now and the end of March to mid-April. That typically will be the peak for fertilizer prices. The western Canadian market should reflect that,” Asbridge said.
The value of the Canadian dollar will also have an impact on prices, he added.
“But that’s really more for phosphate, because they make a lot of nitrogen in Canada and produce a lot of potash in Canada,” he said.
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.