Fertilizer prices ‘float along’ with eyes on China, corn

(Photo courtesy Nutrien)

CNS Canada — It’s shaping up to be a typical winter season for fertilizer prices, according to an industry expert, but he cautions plant expansions in the U.S., corn acreage and the murky world of Chinese exports will all play a part in determining any price spikes in coming months.

“We’re probably expecting a typical season where two-thirds of the fertilizer will be used in the spring,” said David Asbridge, president at NPK Fertilizer Advisory Service in St. Louis.

“We don’t see anything out of the ordinary, with one caveat: If we look at what’s going on in the nitrogen market, we’re opening three world-scale plants here in the U.S.”

One of the plants is already open in Louisiana, while two more should open soon in Idaho, he said.

With the harvest in North America largely over, prices for fertilizer are generally expected to “float along” in December, January and early February before experiencing a seasonal bump due to the planting season.

However, Asbridge cautioned, if there are any delays to the scheduled startups of the plants, prices could push higher.

“Nitrogen prices could have a bit of a run-up until more product comes up the river and is made available to dealers and farmers,” he explained.

China, meanwhile, has temporarily closed some of its plants due to low prices caused by overcapacity in nitrogen, phosphorous and potassium, Asbridge said.

However, the country has ramped up its production in recent years to become a major exporter, and if prices start to climb, it will likely resume selling more product.

“China can be a huge driver in both nitrogen and phosphate markets.”

Production in Canada has also slowed down. PotashCorp recently laid off workers and cut production at facilities due to low prices.

“I don’t think prices have perked up enough yet that they’re going to reopen any of that stuff either,” he added.

The amount of corn U.S. farmers intend to plant next year will also impact fertilizer’s bottom line.

Right now, soybean prices are much more attractive than corn and as a result, many analysts expect soybean acreage to grow next spring at the potential expense of corn.

“We think it (corn acreage) will come down to 88 to 90 million acres,” said Asbridge. “That will have a small impact on fertilizer consumption because corn is the biggest fertilizer user in the U.S.”

However, at the end of it all, Asbridge stressed he still believes fertilizer will likely follow its seasonal roadmap, with prices bumping up in the spring and again in the fall.

Still, with so many moving parts in the fertilizer complex, one major weather event or major trade issue could push prices to levels no one is expecting.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.


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