Global fertilizer supplies to outweigh demand, Rabobank says
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WASHINGTON, Dec. 22, 2014 - While global fertilizer supplies appear set to outweigh demand, the forecast for pricing for the first quarter of 2015 “looks rather cloudy,” according to a new report on the global fertilizer industry by Rabobank's Food & Agribusiness Research and Advisory group.
The report, which looks at issues of price, supply and demand in key agricultural markets, says that lower farmer margins will prompt farmers to be more prudent in fertilizer applications, but “strong demand destruction” is unlikely. Spring demand in the Northern Hemisphere will prevent prices from slipping significantly, the bank said.
For urea, an increase in supply in the first quarter of 2015 will set the tone for global prices, Rabobank said, pointing to rumored new capacity in Algeria and Egypt and a change in China's export tariff that is likely to boost the product's availability.
“Chinese urea export availability could improve by another 10-15 percent in FY 2015,” Rabobank analyst Suzanne Pera said in the report. “This would amount to 11.6 to 12.1 million tons based for FY 2015.”
Spring demand in the Northern Hemisphere would normally provide upside in phosphates as well when combined with supply management. “However, the new Chinese tax policy (of 100 renminbi/ton for diammonium phosphate) will provide downside, as availability of phosphates would improve if prices decline significantly, (and) some buyers might be inclined to lock in prices.”
Meanwhile, the potash market is awaiting the outcome of negotiations between suppliers and China for the Q1 2015 price direction. Continued pressure on farmer margins in the U.S. and Europe is likely to drive spring potash applications lower by as much as 5 percent, according to the report. Relatively high inventories and downward price pressure on grains and oilseeds will put a lid on further price increases.
“Reduced global demand and relatively high inventories in significant spot markets give China pricing power, despite producer-managed supplies and a flooding accident at one of the Russian mines,” says global strategist Dirk Jan Kennes.
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