Fertiliser markets to remain bearish in the long term

The Agricultural and Horticultural Development Board (AHDB) in the UK is reporting that, for the remainder of 2014, total fertiliser demand signals are mixed. India’s requirement is likely to be constrained if the weak monsoon rains encourage the planting of alternate crops to rice in the Rabi season, as these typically have lower nutrient requirements. Furthermore, the weak rupee is also disfavouring fertiliser imports.

In Latin America an expansion in the crop area and record soyabean crops has led to strong fertiliser demand in the year so far, encouraged by favourable price relationships. Even with the soyabean/fertiliser price ratio becoming less favourable, fertiliser demand there is expected to remain strong, especially where forward sales have fixed higher crop prices.

Despite falling crop prices, the relationship between crop and fertiliser prices has remained favourable in many areas, sustaining strong fertiliser demand so far this year. Large and newly cultivated crop areas in countries such as Brazil have further added to demand. These factors, alongside likely policy movements and political developments in key locations, should provide support to fertiliser prices through the remainder of the year, although the impact of weakening crop prices is a big unknown. International outlooks up to 2018 suggest steadily increasing capacity for many nutrients above demand, but this is dependent on the progress of proposed projects.

According to the AHDB, the key factors that will impact on fertiliser markets are:

  • Bullish supply and demand pressures look to slightly outweigh bearish influences in most nutrient markets in the short term.
  • Falling cereal and oilseed prices have not yet disincentivised the use of most fertilisers but the impact in coming months is unclear.
  • Anticipated capacity development projects into 2018 could put longer term downward pressure on prices, subject to these being completed.