February 25, 2014
Rabobank reports poor outlook for global fertiliser sector in Q1



Rabobank has published a new report on the bearish outlook for the global fertiliser industry for the first quarter of 2014, with a temporary imbalance in the demand and supply of urea possibly putting further temporary upward pressure on prices.


Phosphate demand in first quarter of 2014 is finding support from speculative buying from the US and Brazil, with prices finding additional support from elevated sulphur prices. However, at the end of this quarter, prices for both phosphates and urea could fall to levels seen before the recent price spike, as supply will exceed demand.


Potash prices are likely to remain stable at current levels, with overcapacity looming over the market and supply chains already appearing full.


While phosphates and urea prices appear to be heating up, the US market for potash is still slow. Buying is mostly limited by high inventory levels and US potash inventory levels do not yet reflect supply cuts by producers. US producers' inventories only declined 1% in December to 2.99 million tonnes, down from 3.01 million tonnes in November, limiting the room for the supply pipeline to take in substantially more volumes in first quarter.


European fertiliser markets appear relatively stable at the moment. The warm start to the year could shake things up by accelerating the timing of the spring application. Both the pending spring application and the current tight supply are driving nitrate prices higher and could continue to do so throughout the quarter.


Brazil's fertiliser industry is out-of-season, with fertiliser application for soy almost half a year away. High inventory levels are likely to reduce imports in first quarter 2014, with the possible exception of potash.


A good crop outlook and favourable agronomic conditions support fertiliser volumes ahead of the Kharif season. However, limited subsidy availability and uncertainty over 2014 Nutrient Based Subsidy (NBS) policies might cause buyers to hesitate.


Additional volumes of urea and Diammonium phosphate (DAP) from China are likely to enter the world market as a result of lower export tariffs. However, additional volumes are not likely to start making a significant impact in the first quarter. China's potash imports dropped nearly 12% after steady demand and increased domestic supply.


Newly struck gas price should incentivise Ukrainian production, but the start-up has been hampered by cold weather. Export issues in Middle East and North Africa (MENA) have been resolved to some extent, but the start-up of production is slow and gas curtailment issues still plague producers.


Rabobanks' Food & Agribusiness Research team looks at supply, demand and pricing for urea, phosphate, and potash in key international markets.