Farmers are set to reap the benefits of declining fertilizer prices as they continue planting crops this spring after soaring prices.
The North America Fertilizer Price Index fell 3.3-percent in the first week of May.
Josh Linville at StoneX Financial Services said the outlook for nitrogen has improved in the last 12 months.
“From a U.S perspective, urea is the best priced nitrogen source,” Linville said.
Domestic fertilizer production represents only 7-percent of global production, and so events thousands of miles away affect prices at home.
Center to the soaring prices of nitrogen last year was the European natural gas production rates. Gas prices dictate the cost of ammonia and nitrogen and high natural gas production cost turned off most production there.
For example, in August, Dutch TTF, a virtual trading point for pricing natural gas and the overall European LNG import market, reached $103.
“It looked as though they would remain there for a long time with winter coming,” Linville said. “But the tide has turned because of a warmer winter, and today, the Dutch TTF is in the $14 range.”
Moreover, Russian invasion of Ukraine a year ago sent nitrogen prices spiraling, as Russia provides 20-percent of global fertilizer supplies. Belarus’s potash exports account for 20-percent of the global supplies.
The perception at that time was exports would almost come to a halt because of Western economic sanctions on both countries.
However, a global outcry about food security led to a change in policy. Eventually, Russian-maintained business relations with non-Western nations and the nitrogen exports remained almost unchanged.
The third biggest focus point has been on China’s urea exports. In the fall of 2021, China banned urea exports.
“Many believed that would continue going forward. While exports were down significantly overall in 2022, there are signs of them coming back,” Linville said.
Potash values have been on a near continuous slide since last March as farmers made applications cuts.
“While current values are still high versus. history, they match up very well against current grain values. This could mean demand is higher than anticipated,” Linville said.
Tampa ammonia, the world’s benchmark, has plummeted to pre-war level this year as production costs declined.
Middle East ammonia was down 27-percent but still trading above Middle East urea, suggesting further price declines.
“Ultimately, there are still several global factors that will play a large part in how much values go up or down moving forward,” Linville said. “It is hard to bet against a near yearlong price slide trend but eventually, bear markets turn around.”
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