Farmers looking to book fertilizer ahead of next spring can expect to see some softening of prices over the winter months, before seasonal demand picks up and costs rise again, according to a fertilizer market analyst.
For nitrogen it will depend on the product, with ammonia likely to see the highest prices in relation to urea and liquid nitrogen, said David Asbridge, president and senior economist with NPK Fertilizer Advisory Service at Chesterfield, Missouri.
Ammonia stocks are getting tight, but solid production in the U.S. will leave the market with adequate supplies in the spring, said Asbridge. He expected ammonia prices would soften over the winter as inventories are rebuilt. However, with expectations for large corn acres next spring, the resulting demand will eventually lead to a seasonal bump in the spring.
With urea, issues with the low Mississippi River are causing some boats to back up in the Gulf Coast, said Asbridge. Urea prices may have a little room to the downside, he said, but noted the market is likely already close to its bottom for the winter.
It’s a similar story in liquid nitrogen, as the U.S. is both importing and producing at record levels. He expected inventories would build through the winter, but prices would still jump in the spring.
Farmers are generally coming off a good cash year in North America, which means they will likely start booking product for the spring season before the New Year, said Asbridge. He noted high commodity prices should make fertilizer a "good buy for farmers."
In the U.S., farmers will use six to eight per cent less phosphate and potash on their 2013 crops, said Asbridge. He said there were large applications ahead of the 2012 crop, but production failed to live up to expectations due to the drought conditions seen across much of the growing area. As a result, the phosphate and potash is still in the ground in many cases.
However, nitrogen needs to be re-applied each year, as it does not carry over well in the soil. Soil that is too dry will see its nitrogen dissipate into the air if there is no water to hold onto. If the ground is too wet, the nitrogen leaches too far down into the soil for the plants to utilize, said Asbridge.
Phosphate and potash prices are also forecast to be stable, or down slightly, through the winter before moving back up in the spring.
India and China are also not stepping up to the table to renegotiate contracts for potash the coming year, said Asbridge. There’s also an oversupply of potash in Canada and Eastern Europe right now.
Phosphate came out of the spring season with tight inventories, but export demand has been relatively slow as India has cut back on its demand, said Asbridge. That lack of demand is causing stocks to start to build up, which should put some pressure on values.
If India does step up and start buying, then there could be some activity in the phosphate market, but if they don’t, Asbridge expected prices would hold where they are, before seeing a seasonal bounce in the spring.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.