Rabobank sees bearish outlook for fertilizer industry

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, May 29, 2014 -- The outlook for the fertilizer industry will continue bearish through the second quarter of 2014, according to a report by the Rabobank Food and Agribusiness Research and Advisory group, which looks at supply, demand and pricing for urea, phosphate, and potash in key international markets. 

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 Researchers found a deteriorating trend in the price of fertilizers, and they expect this to continue in the coming quarter. China has exported significant volumes in its high tax season, and phosphate and urea prices will feel downward pressure as the nation exports even more in its low tax season. 

Fertilizer prices in the U.S. will be under downward pressure from fading demand. In the first quarter, prices were elevated due to supply chain bottlenecks and a compressed application window, the report said. For urea, there could be a limited upside originating from Ukraine if market sentiment is affected by a rationed supply from the country.

•  United States: Increased side-dressing demand and supply chain filling ahead of the autumn application will not be enough to provide significant upside to global fertilizer prices in the second quarter. While demand could induce producers to direct volumes to the domestic market, impact on exports is likely to be limited.

 EU: Nitrate and urea prices have found price support in recent weeks due to supply bottlenecks and early demand, but as demand enters its lull season, prices are set for downward correction.

Brazil: Even out of season, Brazil has a role to play in the global fertilizer arena. Potash producers are keen to secure volumes in the country. Higher prices in Brazil are supported by the expectation of ongoing depreciation of the Brazilian Real and high demand coming from farmers incentivized to increase yields.

India: Indian demand remains under pressure with the Ministry of Chemicals and Fertilizers struggling to pay out subsidies. A potentially weakening rupee and disappointing monsoons could impact fertilizer demand further.

•  China: With the domestic application season mostly finished in China, the demand for phosphates and potassium fertilizers is weakening. An upside in prices appears limited, despite the export window opening in mid-May for phosphates and in July for urea.

Ukraine: The future of Ukrainian production remains uncertain, as potentially increased gas prices, political instability and especially lower world prices could force the country to halt production. To date, the impact mainly been felt in the already tight ammonia markets.

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