CFQ: 2013 Wasn’t the Best Year for Fertilizer Sales
The phosphate market has been on a slow decline since last summer, despite good product movement last fall. The biggest factors have been the wet weather here in the U.S., causing an inventory build-up in the U.S., and extremely slow exports to the largest importer, India. The value of the rupee has declined sharply versus the dollar, putting pressure on margins in India as well as causing prices to be higher than expected to the end user. The Indian subsidy scheme has recently been adjusted to allow for higher retail prices, so imports should begin to pick up after one of the slowest quarters in history.
The outlook for the market is to remain soft near-term with some room for price appreciation as we move into the fall season. This outlook, however, is still highly uncertain and, again, is going to depend to a large extent on this year’s crops and the export outlook. Although our baseline forecast is predicated on a rebound in exports into both the Latin American and Asian markets, India remains a question mark, especially if the value of the rupee continues to slide.
The spring weather in much of the northern hemisphere conspired to keep farmers out of the field and limited how much potash could be applied. Although there’s no hard data, a substantial volume of product is reported to still be in warehouses following what turned out to be a disastrous spring season. This factor, combined with the Indian import situation mentioned above, has kept total potash inventories relatively high. In addition, the expansion of production capacity around the world has kept the market oversupplied.
The international market also remains relatively weak and oversupplied. According to industry sources, inventory remains high in China with Chinese buyers not expected to come back into the market for second half contracts until August at the earliest. The situation in India is not much better.
Going forward, the Midwest wholesale market is expected to trade sideways to slightly lower near-term with very little price appreciation going into the fall application season.
Although the market could move somewhat lower than projected, the recently announced production cutbacks are expected to keep producer inventory in check and prevent any significant deterioration in prices. However, there appears to be little upside in this market given the current surplus in the world markets.
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