Market and product

Nitrogen prices will be sharply down over 2016, broker Raymond James warned, although the market could already be nearing a bottom after the recent sharp decline.

And Russian fertilizer group Acron sees urea prices already at their floor, as Chinese producers see negative margins.

Ammonia and urea are sources of nitrogen, a key plant nutrient, and are produced from fossil fuels.

Seasonal uplift yet to arrive

US-based Raymond James noted some "alarming price trends in domestic urea in recent weeks".

Raymond James noted several transactions in the US of gulf of urea below $220 a tonne.

"This is not an inspiring trend, in our view, particularly when the seasonal uplift in urea is typically into full swing by now," Raymond James said.

Chinese supplies

As well as buyer reluctance, as farmers wait for lower prices, Raymond James noted that Chinese supplies are getting cheaper thanks to declining coal prices and the falling renminbi.

And with new US domestic supplies coming online, Raymond James trimmed its seasonal outlook.

But Russian fertilizer group Acron painted a more upbeat picture, seeing slowing supplies of urea from China, which accounts for 45% of global urea production.

"According to our estimates, urea prices dipped below the cost of production for most Chinese producers, which resulted in a substantial decrease in urea exports from China in the second half of 2015 year-on-year," Acron said.

"We believe that the potential for urea prices to decrease within economically feasible limits has been exhausted," Acron said.

But the group warned that markets "remain highly volatile and speculative".

Guarded outlook

Raymond James is "guarded," on the US fertilizer outlook in general, noting headwinds for the corn sector, as well as weaker overseas currencies, "a pattern that's crippled purchasing power in key emerging markets and impaired domestic exports".

The broker foresaw "incremental belt tightening," among farmers.

Acron forecast the global fertiliser market to recover in the first quarter of 2016, as the Northern Hemisphere spring sowing season approaches.

Bottoming prices

Raymond James forecast urea prices in the port of Tampa, Florida, to average $271 a tonne over the whole of 2016, down 15% year-on-year.

The lowest prices were seen over the first three months of 2016, with prices averaging $248 a tonne.

Ammonia prices in New Orleans were forecast down 12% over 2016, at $400 a tonne, with prices in the first three months averaging $350 a tonne.

Prices for both nutrients were seen rising gradually over the course of 2016.

As of last week, Credit Suisse reported the cost of urea at Baltic ports at $206 a tonne, down 4% since the start of the year, while ammonia was down 11%, at $275 a tonne.