Diverse weather across the Northern Hemisphere is bringing significant uncertainty to the 2013 Q2 fertiliser markets, according to a new report from Rabobank. The fast-approaching Northern Hemisphere planting season will be pivotal in driving short-term agri-commodity prices. A large planting is expected but uncertainty with regard to future weather trends, combined with the current cold and wet conditions, will delay the normal cycle of fertiliser restocking for first half and fall applications. Across South America, all eyes are on the weather as planting of winter crops continues. Overall, the pace of fertiliser demand is now increasing seasonally and fuelling a pick-up in global trading activity.
Dirk Jan Kennes, analyst at Rabobank commented, "Across most regions, a financial incentive to maximise production will drive a large planting across the agri-commodity complex providing a largely neutral price outlook. However, there are some uncertainties regarding policy which will ultimately impact market sentiment. In this landscape, buyers will remain cautious but, nonetheless, at some stage global buyers will need to lock in fertiliser supply contracts".
After a bullish start, global urea prices have begun to wane. Delayed demand and field work in the US and Europe respectively, have combined with oversupply (the extent of which was demonstrated in the much- anticipated import tenders in India during April) to drive a shift to a buyers’ market. Rabobank’s outlook for urea in Q2 2013 is neutral to negative.
Phosphate prices are expected to increase marginally, as various factors combine to limit demand. First, US farmers already applied significant volumes of DAP/MAP in Fall 2012, which will result in lower demand in the spring. Secondly, the 2012/13 crop year was the second year in a row to see elevated agri-commodity prices. While this would traditionally see farmers spend their additional purchasing power on phosphates to restore levels in the soil, this had already been done the previous year and the catch-up effect will not be seen again this year. Lastly, China’s low export tax window will open two weeks earlier than in recent years, and the extra Chinese supply will lower the upside price potential.
The reduction in international potash prices is directly related to the renegotiation of new supply contracts with importers in China and India. In particular, Indian farmers’ willingness to reduce potash application detracts from the industry’s intention to increase prices on the open market during this quarter. However, potash demand is expected to increase in South America and parts of Asia, as farmers take advantage of good crop economics, which should enable the industry to avoid new strong price reductions in the short term.