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Swamped with supply: semi-annual global fertilizer outlookqrcode

Dec. 18, 2019

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Dec. 18, 2019
“Fertilizer prices have reduced considerably in 2019, due to abundant supply and the lack of demand in important markets,” according to Matheus Almeida, Senior Analyst – Farm Inputs. However, an expected rebound in demand – coupled with supply constraints resulting from environmental reforms, government regulation, and unfavorable weather – will likely support global prices, according to Rabobank’s latest Global Fertilizer Outlook ‘Swamped with Supply.’

Regional highlights include:

China: Environmental policy leads the industry to a restructuring. China’s fertilizer prices are forecast to remain at low levels in 2020. National supply-side reforms in the fertilizer sector and pressures from environmental protection policy have greatly impacted the industry, which helps to accelerate industry restructuring and standardize market competition.

US: Delayed harvest and planted acres in question. Fertilizer demand is expected to rebound after seasonal issues in previous crops. However, heavy channel inventory and delayed harvest are likely to figure significantly in farmers’ decisions. Fundamentals still point to weak pricing dynamics for N, P, and K producers through Q2 2020.

EU: Regulations require low volumes of highly efficient products. Fertilizer demand in the major EU markets is expected to decrease by 1.8% from 2018/19 to 2020/21, driven by stricter environmental regulations. In this scenario, farmers must improve fertilizer efficiency in order to continue to reach higher yields. Fertilizer producers face record low prices, weak demand, and pending emissions pressures.

Brazil: Higher demand and lower local production enhance imports. Amid improved farmer margins in 2H 2019, fertilizer demand is expected to grow 2%. Fertilizer imports are forecast at 28.2m metric tons in 2019 – a 2.7% increase vs. 2018. Lower fertilizer prices and a good scenario for commodities are expected to support fertilizer demand growth in 2020.

Australia: Drought will keep local demand in check. Drought continues to grip the eastern states of the country, while a dry season also hit the west, significantly impacting urea demand. If rain hits drought-affected regions prior to planting, farmers will take a conservative strategy to fertilizer applications next season. Local markets are well supplied ahead of next season, which will mitigate any price increases driven by supply shortage.

New Zealand:
We expect there is downside ahead for local New Zealand retail prices, with the peak demand during spring now concluded and local prices yet to reflect the decline in global values. New environmental reforms will require New Zealand farmers to operate within tougher environmental constraints than they have in the past.

See full report here >>

Source: Rabobank

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