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FERTILIZER MARKET REPORT January 26, 2023

Still Downside Risk in Western Canada Delivered Urea Prices to Catch Up to NOLA

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The currency adjusted spread (in metric tonnes) between urea Western Canada Delivered and urea NOLA still has room to fall in my view.

A look at the past five years data indicates that the linear trendline (the dotted line) has been on an upward trend. This points to the fact that Canadian farmers have been paying more for urea on average versus NOLA.

The current spread is C$276/mt versus the five-year average of C$153/mt.

We understand how difficult it is for farmers to purchase urea given the price volatility between Western Canada and NOLA. We believe the madness that started in 2021 could continue for a while as the fertilizer sector is historically slow to adapt to change.

North America Urea Last Two Weeks

According to Green Markets, last week, urea pricing in Western Canada slipped to C$880-$900/mt DEL for January-February and down to C$840-$865/mt DEL for March-April, below the previous C$940-$970/mt DEL level reported in late December. “The markets are sloppy for certain,” commented one regional contact.

Urea prices in Western Canada early this week

In my view, urea Western Canada delivered prices should be in the range of C$775-C$800/mt. I understand that you need fertilizer on farm by April. I still believe that there is more downside risk as we have been preaching in the last few publications.

A large Western Canada distributor/retailer recently dropped prompt FOB prices to $815 South Saskatchewan. Down another $50/mt since last week.

As foreshadowed…

Still time… sit on your hands in my view.

Last week, early-week urea NOLA bargers were reported at US$418/st FOB. Values softened as the week progressed, however, with prices stair-stepping down to US$385/st FOB on January 19.

Early this week NOLA prices dropped to as low as US$340/st FOB in early-week trading, though some said the market had found its legs and was on the way back up, reportedly closing in on the week-ago low of US$385/st FOB.

North America Phosphate Last Two Weeks

According to Green Markets, last week, MAP pricing in Western Canada reportedly dropped to C$1,110-C$1,130/mt FOB for January-February, down from the C$1,135-C$1,180/mt FOB range confirmed for earlier December-January offers. Rail-DEL offers were reported at nearly the same level as the FOB market..

Last week, sources noted firming values on the DAP barge market, while MAP pricing battled for direction. Players confirmed NOLA MAP business as high as US$618/st FOB, increasing from the prior week US$610/st FOB top. Imported tons were seen trading at a US$595/st FOB floor, a US$10/st week-over-week slide from US$605/st FOB.

Players attributed the DAP market’s ongoing firmness to limited supply. “DAP is currently very tight in the market,” said one trader. “Of the imports coming in, 75% is MAP, and (domestic producers are) tight as well.”

We are hearing MAP C$1170/mt Western Canada delivered vs. C$1120 last week. MAP delivered Western Canada is the fertilizer I worry about. I wonder about the impact of logistics issues globally on MAP availability and thus prices.

Green Markets Macro Comments

India

The closing date of the Indian Potash Limited (IPL) urea contract tender has been pushed back to February 1. The tender is the first of its kind to secure 600,000 mt over a one-year period through monthly shipments.

Sources speculate that the delay resulted from a number of reasons. While some said with urea prices falling, IPL might be hoping for lower initial prices in the tender, others were of the view that IPL was taking extra time to fine-tune the rules of the supply process.

One trader also noted that IPL has yet to successfully renew its permit to import urea on a spot basis.

Sources said the spot tender is unlikely to be called before late February.

This new type of tender will keep the market guessing as to how the pricing mechanism will impact the global urea market.

Brazil

Limited interest by buyers and sellers has narrowed the landed price of urea to US$450-US$455/mt CFR. Sources are also reporting that Iranian material is being shopped around at US$430/mt CFR for delivery in January, and US$420/mt CFR for February.

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Industry Tidbits

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• Tampa anhydrous ammonia for February has been concluded at $790/mt CFR, down from January’s $975/mt CFR.

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