Growing Declines for Fertilizer Prices
Spend Matters welcomes another guest post from Nick Smith of Mintec.
Fertilizers are crucial in modern agriculture, with 30-50% of crop yields in developed countries coming as a result of good fertilizer application. Three of the most important chemicals in the world of fertilizers are sulphur, urea, and potash. These are used both by themselves and also in the manufacture of other, more complex fertilizers to solve a range of different nutritional deficits in a wide variety of different soil types.
Fertilizer prices have been under pressure in recent months, with significant drops seen in a range of markets. Sulphur and urea, amongst others, have dropped in price, with potash prices expected to fall further.
Sulphur prices have fallen dramatically in recent months, halving in price since the start of the year. Sulphur can be used as a direct component in fertilizers, but it is more commonly used in the manufacturing of phosphate fertilizers, and demand for phosphates from major importers India and Brazil has fallen as their currencies have weakened. High stocks of sulphur in China have also seen a fall in imports, which has meant higher sulphur availability in other markets.
In addition, urea prices have dropped this year, especially in China where a large proportion of urea production is based on coal as a feedstock material rather than natural gas. With falling coal prices, urea producers have increased their production, leading to a rise in already high global inventories. China is one of the largest exporters of urea, and the build-up of inventories has put downward pressure on the global market.
Potash prices are expected to slide further following the recent break-up of the large producer cartel. Potash is used as a source of potassium for plants, with around 35m tons produced each year. The cartel, which until recently controlled roughly 40% of global potash exports, was originally set up between the Russian company Uralkali and Belarusian company Belaruskali. It later dissolved spectacularly as Uralkali ended the partnership in August and Belarus responded by arresting Uralkali’s chief executive at the start of September. Combined with stockpiles in China and low imports from India, some estimates suggest the price of potash could fall by 20% over the rest of 2013.
The costs of fertilizers are significant operating costs for growing corn and wheat in the US. Reduced fertilizers prices may reduce the overall production costs for crops (if it rains) and this will hopefully ease the pressure on animal feed, as well as related products like meats and dairy markets.
- No related articles found