President Donald Trump cut tariffs on imported fertilizers earlier this month, but prices are still likely to stay high through next year’s planting season amid tight global supplies, analysts say.
In a Nov. 14 executive order, Trump exempted urea, ammonium nitrate, ammonium sulphate as well as phosphate fertilizers from “reciprocal” tariffs applied to most U.S. imports. Potash was already exempt from these duties.
The order also added anhydrous ammonia to a list of products in line for “potential tariff adjustments,” depending on the outcome of ongoing trade negotiations with individual countries.
But multiple analysts told Agri-Pulse that even though the tariffs have contributed to higher fertilizer prices in recent months, lifting them won’t immediately reverse those increases, and prices should remain elevated through planting season early next year.
Phosphates
A big part of whether phosphate prices would drop will be whether Saudi Arabia resumes exports of diammonium phosphate (DAP) and monoammonium phosphate (MAP) to the U.S. market.
Saudi Arabia – a major exporter to the U.S. in previous years – was hit with a 10% reciprocal tariff in April. From June, its U.S. exports cratered, with Morocco filling some of the gap, according to research from North Dakota State University. But Moroccan exports are subject to countervailing duties of more than 16%, and the latest tariff adjustments leave those duties untouched.
Accordingly, DAP and MAP prices have been climbing since Trump’s “Liberation Day” tariff announcement. But even with the tariffs now lifted, Saudi Arabia may not immediately return to the U.S. market, said Samuel Taylor, a farm input analyst at Rabobank.
China has slashed its phosphate exports this year, and Saudi Arabia has plenty of other countries it can sell to other than the U.S.
“They basically just decided to supply the west coast of India with phosphates and eschew North America,” Taylor said. Unless Saudi Arabian exporters see strong price signals to entice them back to the American market, Taylor said, they may be content to leave supply chains where they are, particularly given the unpredictability of Trump’s trade policy.
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“Given the length of time that it takes to send something from one side of the world to the next,” companies need strong signals that tariff rates won’t change when they have product on the water, Taylor said. Right now, “how much conviction do you have that by the time your stuff arrives, there's not going to be a change of terms?” he asked rhetorically.
“I think that the North American phosphate market just stays tight,” Taylor said. “I don't think there's going to be any [price] impact there.”
Josh Linville, vice president of fertilizers at StoneX, is slightly more bullish on Saudi Arabia returning to the U.S. market. As prices stand this week, Linville said, Saudi Arabian exporters can likely take similar profits if they send fertilizer to India or the U.S., he said.
“Saudi Arabia is probably going to be willing to kind of split the difference and send a little bit to both places,” Linville said, adding that the U.S. has historically proven its value as a “a very safe demand destination.”
But Linville offered an important caveat. If Indian demand exceeds expectations, he warned, that could keep U.S. prices high.
Josh Linville (StoneX photo)“It sounds like demand has been better than expected there,” Linville said. The Indian government will be keen to avoid a repeat of 2021 when phosphate stockpiles fell to very low levels, he said.
“We could see them back to buying heavier volumes, which could start pressing their price point up and forcing us to move up with them,” Linville said.
Nitrogen fertilizers
After the “Liberation Day” tariff announcement on April 2, when Trump rolled out the sweeping new duties on almost every major U.S. trading partner, U.S. urea prices in the northern plains began diverging with Canadian prices.
Through the summer and early fall, urea on the U.S. side of the border was an average of $11 per metric ton more expensive than on the Canadian side, according to North Dakota State University research, likely a direct result of the new tariffs.
But again, fertilizer analysts expect the price impacts of the tariff cuts to be muted. That premium had almost evaporated by October. And while U.S. prices fell on the administration’s announcement that it would be cutting duties this month, the market has largely reversed that price drop amid another Indian purchase.
Indian “inventory is really low” Taylor said. “I'm not sure with the level of expected demand globally, whether a reduction in the reciprocal tariffs is going to be met with lower domestic pricing.”
Rabobank estimates a very gradual fall in urea prices, with another price jump early next year.
Anhydrous ammonia
The administration has indicated it is open to future tariff cuts on anhydrous ammonia, fueling speculation that it could end up delivering exemptions for specific countries in the coming months.
Mark Milam, senior editor for fertilizers at Independent Commodity Intelligence Services, said pressure could mount for the administration to provide more tariff relief, if the duties are still in place next spring.
“Corn farmers want their ammonia and [the president] has been feeling pressure from agriculture groups,” Milam said. “We'll just see how it weighs out.”
But the U.S. reliance on imported ammonia has been falling since 2010, according to Enkon Energy, an energy industry consultancy. As little as 10% of the country’s supply could now come from imports, down from almost half 15 years ago.
Accordingly, Linville said any tariff relief on anhydrous ammonia would deliver only minimal price discounts for growers.
Tariff assistance
One potential wildcard in forecasting fertilizer prices, Milam said, is the economic assistance that the administration has promised to farmers.
While a big assistance package wouldn’t change the underlying fundamentals driving prices in each fertilizer market, it could shape business decisions among fertilizer retailers, Milam said.
Retailers are constantly trying to anticipate demand among farmers, Milam said, which can be difficult when margins are low and farmers have been considering pulling back on fertilizer application.
More money in growers’ pockets could prompt vendors to increase their orders on the assumption that they will see strong demand, Milam said.
“A good portion of that money could end up in the hands of the fertilizer industry,” Milam argued. “That's something that we need to watch.”
