Rabobank provides semi-annual global fertilizer outlook

Date:12-11-2020

According to Rabobank, prices across the global fertilizer complex have climbed off ten-year lows during the second half of 2020, primarily supported by improved demand in several major geographies. This has played out most significantly in Brazil and India, two of the top-three biggest importers in the globe for the last five years.

In Brazil, improved commodity prices continue to fuel the run of strong farmer margins. “This year, we expect fertilizer demand in Brazil to increase for the fifth straight year. Year-to-date imports have risen 8% y/y, a 23% increase on 2015”, said Matheus Almeida, Senior Analyst – Farm Inputs at Rabobank.

In India, a strong kharif season and local government reforms contributed to a surge in local sales – the local government reported a 15% y/y increase in fertilizer sales for the first half of the year.

Demand has picked up in other regions too. In Australia, Rabobank expects winter crop production to increase 63% y/y, which has already translated to a 26% y/y increase in nitrogen sales in 1H20.

Heavy supplies and growing production capacity will continue to weigh on prices across the nutrient complex. “In the immediate term, we expect urea and phosphate prices to continue to be supported by demand until the start of 2Q21. Once seasonal demand from the northern hemisphere subsides, markets will again be exposed to heavy supplies,” says Almeida. The International Fertilizer Association (IFA) expects another 9 million t of urea production capacity – a 4.5% increase and well above their forecast demand growth of 1%. Almost half of that new capacity is likely to appear in India, reducing its activity in global markets.

“On an encouraging note for fertilizer suppliers, we see a more positive time ahead for potash markets. We expect that importers in China and India will continue to cover inventories, and sustained demand in the US and Brazil will ensure demand remains,” concludes Almeida. On the supply side, current low prices may limit production in high-cost plants and delay new projects coming online. As a result, potash prices are expected to increase at a constant rate over 1H21.