Market and product
Fertilizer prices to stagnate, despite crop rally
The jump in crop prices has yet to reach a level where it will pull fertilizer prices higher, with farmers already paying up for nutrients, Credit Suisse has said, in a report slashing its forecasts for potash values.
Although the recent jump in crop markets - which has sent corn and soybeans to six-month highs, and wheat to a 22-month high - has ensured that farmers "should make decent money" this year, it hadn't stopped fertilizer looking expensive.
Nutrients accounted for 19% of growers' total costs, compared with a historical average of 16%.
This limits the scope for fertilizer groups to make growers pay more.
"It may be difficult for fertilizer producers to meaningfully raise prices, or risk demand destruction at the farmer level," Credit Suisse said.
The bank forecast "normal" fertilizer applications in the second half of the year, although it added that it expectations were based on a prediction of grain prices remaining around currrent levels.
"We expect grain prices to remain range bound over the foreseeable future," the bank said.
Latin American resistance
Indeed, potash producers were already seeing "mixed results" from a drive to raise prices, with some companies breaking ranks.
Credit Suisse 2010 fertilizer price forecasts, change on Feb forecast Ammonia: $335 a tonne, +$20 a tonne (Yuzhny) Urea: $285 a tonne, -$45 a tonne (Yuzhny prilled) Diammonium phosphate: $450 a tonne, +$50 a tonne (North Africa, US Gulf) Potash: $345 a tonne, -$20 a tonne (Vancouver spot standard) All estimates given on free on board terms |
"Producers… have encountered resistance in Latin America, as some suppliers are willing to accept lower prices to lock in volume commitments."
The bank forecast that prices would, in the second half of this year, remain "relatively flat" compared with the first half, and sliced by $75 a tonne, to $385 a tonne, its forecast for average Vancouver potash prices next year.
Middle Eastern megaproject
Meanwhile, phosphate prices, which had beaten expectations in the January-to-June period, would be pulled back by robust Chinese exports in the second half, and remain depressed in 2011 thanks to the first production from Saudi Arabia's Ma'aden plant hitting the market.
Credit Suisse 2011 fertilizer price forecasts, change on Feb forecast Ammonia: $360 a tonne, +$30 a tonne (Yuzhny) Urea: $275 a tonne, -$45 a tonne (Yuzhny prilled) Diammonium phosphate: $400 a tonne, unchanged (North Africa, US Gulf) Potash: $385 a tonne, -$75 a tonne (Vancouver spot standard) All estimates given on free on board terms |
The bank also slashed its expectations for nitrogen prices, after a jump in Ukraine's gas prices, which was expected to have fed through into finished fertilizer, failed to materialise.
Urea prices faced further seasonal weakness into September and October, as "purchase activity from Latin American and in particular India and Pakistan dries up", but were likely to rise towards the end of the year.
(Source: www.agrimoney.com)
