Fertilizer prices stray away from corn influence: Analyst

(Photo courtesy Agrium)

CNS Canada — Foreign exports and transportation look like they could be the main issues facing the fertilizer industry in 2015.

Countries such as Ukraine, Russia and Belarus are busy players on the market, with Morocco also ramping up production. As a result, more supplies of phosphates and other fertilizers are out there, according to David Asbridge, president and senior economist with NPK Fertilizer Advisory Service in Missouri.

“Availability doesn’t look like it will be an issue this year,” he said.

In particular, he said, shipments of fertilizer have been streaming to the Gulf Coast, causing some price pressure to bleed up to the Midwest.

“Potash prices have started coming down and are likely to stabilize or even go lower before the heart of the spring season gets here,” he added.

That will be welcome news to Prairie farmers who have seen higher-than-expected fertilizer costs, according to the president of Manitoba farm group Keystone Agricultural Producers.

“We’re always told fertilizer prices track corn prices closely, and we’ve seen a significant decline in corn prices recently, but fertilizer is more expensive right now than a year ago, which doesn’t make a lot of sense to producers,” said Doug Chorney.

Fertilizer and corn have generally matched each other’s movements over the past five to six years — but that’s slowly changing, Asbridge said.

“The nitrogen producers saw this coming; once the corn prices started falling and wheat prices started falling they began to cut back on production. They kind of limited the supply there, to kind of keep prices up.”

Nitrogen prices are expected to stabilize with a modest bump come springtime, said Asbridge.

Over the holiday season, Chorney said, anhydrous ammonia priced at $910 per tonne, which was higher than expected.

“Not too willing”

Logistics issues, transportation problems and the challenge of keeping supply through the distribution network are often cited as the reasons for the high price, he said.

As a result, some producers may be choosing to wait to purchase their fertilizer needs.

However, Asbridge said, the situation may play out differently at the retail end.

“If retailers have booked stuff in without pre-selling it, they’re not going to be too willing to move that price down any,” he said.

Weather will also likely play a factor. A wet, dreary spring could keep prices down while an early warm spring could cause values to increase over what was expected.

“We expect nitrogen prices to kind of stabilize here for a little bit — there’s not much upside to it — but once we get into spring we anticipate a little seasonal bump in prices,” Asbridge added.

Farmers with good soil levels may also skip a year, he said.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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