CFQ: 2013 Wasn’t the Best Year for Fertilizer Sales
Also, reduced supplies out of Egypt due to interruptions in natural gas supplies, combined with production outages in the Ukraine, have also helped take some of the surplus out of the world trade balance. The other factor adding some support to the market is the slower than expected discharge of export tons coming out of China.
Going forward, the outlook remains fundamentally soft through the end of the calendar year with prices forecast to trade mostly sideways through the third quarter, then pick up a little strength as fertilizer begins to move in the fourth quarter. There does not seem to be much upside to this market, however, due to the import situation. Import volumes during Q1 and Q2 of FY14 are forecast to be down from last year’s record volume but remain well above historic averages.
UAN movement seems to have been relatively strong this spring as it became the product of choice for much of the side-dressing that had to be done due to the late, wet spring season. It has become the largest nitrogen product over the past several years for several very good reasons, and being a good side-dress product is one of them. Despite the product movement, however, prices have continued to drift lower as the season ends and the domestic market has become a bit oversupplied.
We expect prices to trade mostly sideways near-term followed by some minor appreciation going into the fourth quarter. However, there appears to be slightly more downside than upside. One key swing factor will be imports. A weakening offshore market later this summer could lead to higher than expected import levels. The forecast also assumes that U.S. production levels will remain close to current levels. This assumes that additional supply from the PCS Geismar facility will be offset by either lower production at other facilities and/or higher U.S. export volumes.
The Midwest ammonia market has stabilized following a precipitous decline from levels at the first of the year. The lack of activity is not too surprising given the time of year as well as buyer uncertainty over the fall season. As discussed earlier, where this year’s corn crop is going to end up is anybody’s guess. Concern over a shortened fall application season is also weighing into the equation.
Going forward, where the market actually ends up is going to depend on the weather this summer and fall. While we continue to expect a reasonably strong fall, a shortened application season, combined with the high carryover from last spring, will likely cut into producer shipments and help keep a lid on any additional price increases.