A recent Rabobank report has highlighted what it described as a “complex scenario” for the global fertiliser market.
According to the research, fertiliser costs are down, but so are commodity prices, squeezing farmers’ margins.
Demand for certain fertilisers, such as phosphates, is experiencing a downturn, however the overall use of fertilisers is projected to rise in 2024, but at a reduced pace, according to Rabobank.
Operating costs for farmers, especially for fertilisers, are returning to pre-Ukraine-war levels, while at the same time commodity prices are falling.
This combination has led to a squeeze on operating margins, which are now below the average of the past two years, making farmers more cautious about investing in their farms, according to the report.
Senior analyst – farm inputs at Rabobank, Bruno Fonseca said: “Despite these headwinds, the fertiliser sector is showing resilience.
“Geopolitical factors, among other issues, could present further obstacles, yet the growth in fertiliser use is anticipated to persist.”
Agri commodity markets
According to the Rabobank report, commodity prices are falling, with a number of factors exerting pressure on them.
Record-level global stocks of corn and soybeans, bolstered by substantial crops in Argentina, Brazil, and the US, have created a buffer that has subdued market volatility.
Meanwhile, Russia’s record wheat exports have kept wheat prices in check, despite a global stock decline.
Investor outflows and concerns about a potential recession have also weighed on the market, although a tangible impact on demand has yet to be seen, according to the report.
However, rallying crude oil prices since December 2023 have lent some support to agri commodities used for biofuels.
Producers have responded to lower commodity prices by adjusting operation costs, Rabobank has said.
“In response to falling commodity prices and tightening margins, producers are making strategic adjustments,” Fonseca continued.
“By reducing crop area, they aim to realign supply with demand, even if it means operating at breakeven or negative margins.”
Fertiliser
Rabobank has indicated that certain fertilisers are vulnerable to the decline in demand. Nitrogen (N) fertiliser prices are on a downward trajectory, influenced by diminished demand and falling natural gas prices.
The phosphate market experienced a price surge early in 2024 when China shifted its focus to domestic needs, curtailing global exports.
This trend reversed with China’s resumption of exports in mid-March, though Rabobank has said it remains to be seen if this will bring stability to the market.
Despite a reduction in consumption forecasts, levels are still expected to surpass those of 2023.
Potash, on the other hand, is witnessing a robust supply due to increased exports from Belarus and Russia, leading to lower prices.
While potash demand is projected to remain strong in 2024, it is uncertain how farmers will react to the price reductions, according to the report.
Europe
Lower price volatility and limited upside are expected for European fertiliser prices until the back end, based on stable supply and slow demand.
Weather extremes, like wet conditions in north-western Europe and drought in south-eastern Europe will impact fertiliser application.
At the beginning of 2024, European N fertiliser prices recorded an increase. The urea price spike in January was driven by supply concerns related to the logistical risks and potential production disruptions caused by shipping issues in the Red Sea.
By mid-March, N product prices had already softened, according to Rabobank.
As the European low season approaches, even lower price levels are expected before picking up slightly for the autumn farming season.
Rabobank said that with stable crop area projections in Europe, weather becomes the major factor impacting fertiliser consumption in the region.