A new report issued from Rabobank indicates that the global fertilizer industry will have an oversupply of product throughout the first quarter of 2013. This is expected to put pressure on most fertilizer prices with the exception of urea.
Reduced demand from end users and inventory destocking during the fourth quarter of 2012 has led to the current situation, according to the Rabobank report. The result is a lull in global trading that will carry through the first quarter of 2013. The bank said the lull in trading at the end of 2012 was not unexpected and is considered normal given the time between harvest and planting.
“The bank predicts that global fertilizer prices are likely to remain relatively range-bound, and says that market fundamentals suggest global fertilizer markets will remain relatively balanced through Q1 2013,” according to Fort Mill Times. “However, a general oversupply, especially across the phosphate and potash complex, will linger through Q1 2013, providing some potential downside price risk. As a result, Rabobank has a slightly bearish view for the fertilizer complex through Q1 2013, with urea being the exception.”
Fertilizer buyers have been cautious through the end of 2012. China did not sign its contract with Canpotex until Dec. 31. India remains without a contract and claims to have enough supply through the second quarter 2013.
“Looking ahead, as agricultural markets are faced with the challenge of rebuilding global stocks next season, and given the precariously balanced fundamentals, global agri commodity prices are expected to remain at elevated levels in 2013,” said Rabobank analyst Dirk Jan Kennes.
For the short term, global buyers are expected to continue deferring purchases as they await lower prices.