Slow fertiliser demand from cautious farmers who are not seeing improvements in agricultural commodity prices is met with more than enough supply.
The 40 USD/tonne increase in the phosphoric acid price in India—from 765 USD/tonne to 805 USD/tonne P2O5—was larger than most analysts expected. The other two benchmark price increases of the past two weeks, the 1H 2015 Chinese potash price and the US Tampa April ammonia price had brought no great surprises.
Indian phosphate producers, who use ammonia and phosphoric acid to produce DAP, are believed to have accepted the higher than expected price increase following a bearish outlook for ammonia in the Eastern Hemisphere. Ammonia prices decreased with 6 percent in India last week and severe oversupply of ammonia in the Eastern Hemisphere will keep a strong lid on prices.
The arbitrage decisions of the Indian phosphate industry will help shape the short-term global market. Higher DAP prices resulting from greater DAP import volumes can strengthen the position of suppliers in the Americas. However, demand needs to increase significantly in these regions for any material impact on prices to become feasible.
The market is also hoping for India to take up substantial volumes of the urea that is entering the market. A purchase tender has not yet been announced. Delaying the tender for as long as possible will help India achieve a lower price as long as the floor in the urea market is not reached. A urea floor price is estimated to be another USD 10 to USD 20/tonne lower than current FOB export prices in China and Ukraine—the marginal cost producers. Evidence of Chinese aspirations for the urea export market surfaced last week when Chinese export statistics showed all-time high export volumes of almost 1.3 million tonnes in February.
Analysis by Viktor Ikeda, a new member of our Global Farm Inputs team, shows that Brazilian farmers joining their colleagues in Europe and the US in cautious fertiliser application looks likely. This caution is due to the margin pressure resulting from lower agricultural commodity prices and currency headwinds. And with the main driver of global fertiliser demand shifting into a lower gear, global fertiliser markets remain strong buyer markets.
Source: https://far.rabobank.com/en/sectors/farm-inputs/Weekly-Fertiliser-Update-Week-14.html
