While investors have been obsessed with when demand for potash will rebound, another key crop nutrient has quietly pushed into the spotlight as tight supplies ratchet up prices.
Phosphate is starting to command more investor attention as production outages have limited supplies of the crop nutrient and dragged down inventories. Though the crunch might not last long, phosphate-based fertilizer prices have surged – while potash pricing has languished.
“I think in the short term phosphate pricing is going to continue to move higher,” said Atlantic Equities analyst Colin Isaac. “We are just coming into the period of maximum demand.”
“The simple fact is that these stocks do tend to track the price of the nutrients that they sell,” Isaac said.
Prices for diammonium phosphate (DAP), a key phosphate derivative and fertilizer, are about US$435 a tonne now, up from a low of $260 a year ago. Some analysts see prices breaching the $500 mark as the spring planting season approaches in North America.
Furthermore, North American potash inventories at the producer level are currently 45 per cent above the previous five-year average. By contrast, DAP inventories are 45 per cent below average, according to the most recent data.
The tight supply situation could ease toward the end of 2010, as producers restore production and China lifts its seasonal tariffs on DAP exports, once again dragging DAP pricing back to $300 to $350 a tonne levels.