CFQ: 2013 Wasn’t the Best Year for Fertilizer Sales
Fertilizer year 2013 turned out to be another unusual year for the fertilizer markets in what has turned out to be a string of unusual years. While we’ve had two good fall fertilizer application years in a row, the spring season the last two years has been anything but “normal.” In 2012, warm weather and ideal soil and moisture conditions across most of the Corn Belt led to one of the earliest planting seasons on record. Unfortunately, the demand for fertilizer hit before the supply was in place. That led to sharp increase in prices and left both wholesalers and retailers scrambling for tons.
This year was almost the exact opposite with one of the slowest planting dates on record. The net impact was a disastrous spring season, particularly for P and K. Although farmers managed to get most of their nitrogen down, that certainly wasn’t the case for P and K with many farmers opting to skip pre-plant fertilizer applications in order to get the crop in the ground. Ammonia was also hit hard with a significant portion of the spring planting tons being shifted over to urea and UAN.
So what’s going to happen in FY14? That’s a good question, particularly considering that forecasts, by necessity, are made under the assumption of “average” or “normal” conditions. Given that caveat, here’s our assessment of the fall season.
Demand - For FY14, this should be another good fall season. However, given how late this year’s corn and bean crops are going to get harvested, the fall application window could be shortened. This will be particularly true for ammonia if permafrost sets in early. The other key factor is going to be the size of this year’s crop. Obviously, a larger than expected corn crop would mean lower corn prices and lower acreage for 2014 while a smaller than expected crop would translate into higher prices and higher acreage. All factors considered and assuming a “normal” weather pattern, we expect total nitrogen to remain at close to the FY13 estimated level. However, ammonia is expected to rebound from this year’s poor spring and regain market share from both urea and UAN. Phosphate should rebound and increase by about 6 percent while potash usage increases about 7 percent.
The Gulf urea market has dropped nearly $100 per ton since early March, but appears to have finally hit bottom. The recent Pakistani and Indian tenders have given some life to the market as these sales will absorb some of the recent surplus at the world level.