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Fertilizer Market Report – May15, 2024
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In this week’s fertilizer report:
- Urea spread between NOLA and Western Canada supports Genesis Business Model
- Mosaic Calling for Tight Phosphate Market
- Peak Trading comment on Wheat vs Corn Spread
- North American Urea and MAP prices
- Industry Tidbits
News of the Week
Urea Western Canada DEL, Urea NOLA Spread is Blowing Out Again
As readers know, this proprietary gauge is one of my favourites in telling a story about Urea Western Canada DEL prices vs Urea NOLA prices.
Since September 8, we have witnessed Urea NOLA prices collapsing by 31% while Urea Western Canada DEL prices rose by 3% in the same time period.
This is a bearish indicator for Western Canada Urea prices in our view here at Genesis Fertilizers.
India is a big driver of the weakness at NOLA due to Indian urea inventories of 10mmt which is historically high. This has the global markets on pause while traders await the next Indian urea tender.
The Genesis Fertilizer business model essentially removes this volatility from producers’ fertilizer prices. High urea prices provide a large dividend which can be viewed as lower urea prices. Low urea prices are low urea prices.
The Mosaic Company Market Outlook – Phosphate Market to Remain Tight in 2024
Agricultural fundamentals remain constructive, with grains and oilseeds stock-to-use ratios expected to remain pressured for the foreseeable future. While corn and soybean fundamentals and prices have softened recently, growers around the world remain profitable. Constructive long-term agriculture fundamentals and favorable economics incentivize growers to maximize yields. In 2024, the El Nino weather pattern is expected to shift to La Nina, creating a favorable backdrop in Southeast Asia, India and Brazil. Certain parts of the world have gone through two years of under-application of fertilizers, and growers are seeking to replenish soil nutrients. For fertilizer demand, as North America is transitioning out of a robust spring planting season, the rest of the world is set to pick up in the coming months.
Constructive long-term agriculture fundamentals and favorable economics incentivize growers to maximize yields.
Despite the credit and liquidity challenges in the region, Brazil is seeing low inventory and a favorable demand outlook sets the stage for peak or near peak fertilizer shipments in 2024. Global potash supply constraints are likely to continue to abate this year as we see higher exports from Belarus and Russia.
However, we also expect strong palm oil fundamentals to drive demand recovery in South East Asia. Despite the temporary resumption of China phosphate exports, the favorable overall picture has not changed as domestic agriculture and industrial demand will continue to be prioritized over fertilizer exports in the long term.
These factors suggest the global potash market is balanced and the phosphate market will remain tight in 2024.
THE MOSAIC COMPANY REPORTS FIRST QUARTER 2024 RESULTS
Peak Trading – The Wheat vs. Corn Spread is Flashing Warning Signals
Is this a good opportunity to sell expensive Wheat contracts versus relatively cheap Corn?
North America Urea Last Week
According to Green Markets, urea prices in Western Canada were quoted in a range of C$775-$780/mt DEL, unchanged WoW. We saw one retailer outside of Regina boost spot prices to $800 last week as rain provided some relief from the draught.
In Eastern Canada, urea prices were down C$25/mt on the high end to C$620-$700/mt according to Green Markets.
Last week, NOLA urea prices fell slightly to a range of US$280-$297/st from a range of US$285-$308/st the previous week.
Here at Genesis, we believe that urea prices in Western Canada are going to eventually correct to the downside. Our advice is sit and wait. The chart above is telling a bearish story for urea prices in Western Canada.
North America Phosphate Last Week
According to Green Markets, the latest delivered Western Canada MAP prices were flat WoW for the fifth week in a row in a range of C$1,135-$1,145/mt.
In Eastern Canada MAP prices were unchanged WoW at C$985-$995/mt according to Green Markets.
MAP NOLA was up 9% on average to a range of US$520-$530/st from the previous week’s range of US$480-$485/mt.
Industry Tidbits
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