FERTILIZER MARKET REPORT November 25, 2022

Mosaic expecting phosphate inventories to be significantly depleted

Regarding urea…Stop and think for a few weeks

Comment from Joc O’Rourke, President and CEO of The Mosaic Co. In 3Q Earnings Report

The phosphate market continued to be impacted by supply constraints of its own, the company said, citing continued expectations of a full-year export reduction totaling 5 million mt from China, which O’Rourke expected could continue through “at least” the first half of 2023, and possibly beyond.

“While global channel inventories of phosphate and potash remain below historic norms, certain regions – especially in the areas where we do most of our business – inventories built in the first half of the year,” O’Rourke said. “But prices have retreated back to levels low enough to entice growers to step back into the market. We expect inventories to continue working lower through the end of the year and into early 2023.”

While US farmers were previously seen mining their soil, falling fertilizer prices were said to entice growers toward more typical application rates.

“US fall application has been trending back towards normal levels. We believe we could end the season with inventories significantly depleted, especially for phosphates,” said O’Rourke. “The strength of crop prices and more affordable fertilizer prices suggest nutrient demand will recover from the summer lull we experienced during the third quarter.”

Commentary from Green Markets

India

Last week, Traders and producers were quietly trying to figure out how to deal with the NFL tender that closes on Nov. 14. So far, expectations are that prices will be lower than the $649-$655/mt CFR from the IOPL tender last month. The amount of urea to be secured is also expected to be less. Sources speculated that the take will most likely be less than 1 million mt. The shipping deadline is Dec. 22, and traders said the short delivery time could mean fewer tons will be available for offer. Because the material will be arriving so late in the season, sources speculated it would most likely be used as buffer stock to build up reserves for the beginning of the next application season.

Brazil

After initial indications that prices might move up because of the NFL/India urea tender call, sources said the landed price remained stable at USD$580-$630/mt CFR. Earlier reports that the range would be higher were dismissed by international traders. By the end of the week, their description of the Brazilian urea market as being dead proved accurate. Deals at the lower end of the range reportedly involved product from North Africa. As previously reported, urea imports showed a year-over-year drop of 7.5% for January-October. Demand for urea has backed off, said sources, partly because of the higher prices throughout the year. Ammonium sulfate took up the slack for the nitrogen demand of blenders. Looking into November, the vessel line-up shows a reduction of about 4% from November 2021 deliveries. The Rondonopolis urea price tightened to USD$755-$780/mt FOB ex-warehouse. Demand is slow, partly because of demonstrations by farmers and other rural activists against the results of the presidential election, which are causing delays in shipments and access to supply centers. Demand is expected to pick up for the corn season application, however.

Commentary from Argus

In ammonia, the market is still somewhat soft with supply options continuing to outweigh demand across most of the key import hubs and that has contributed to further prices declines throughout last week. But also some fresh buying interest with lower prices forcing some to enter the market. Those sales took place into Europe, Turkey, India and Taiwan however prices in Europe were down another USD$50/mt. The overall outlook is still soft but this is dependent on feedstock (natural gas) costs.  

In urea, last week prices were mostly down. Most producers are still long and this if forcing traders to short the market. Demand from the US and the EU is well below forecast at this time and that is limiting options for the sellside. China is negotiation government-to-government around 700,000mt of urea to Pakistan, Ethipia and Philippines which is undercutting market-based supply. The overall outlook is for tight supply in consuming markets particularly the US and the EU which has the potential to rapidly turn the urea market around as spring approaches but in the short term that market remains thin on weak demand.

In phosphates, liquidity is thin with prices falling across the board. Indian demand remains limited with demand confined to a single December cargo loading from the US. Pakistan import demand has all but disappeared. Brazil MAP prices fell another USD$20/mt to USD$600-$620/mt cfr. NOLA values also remain under pressure with more MAP vessels are scheduled to come in from Russia. Production is also coming back on line in Lithuania and Mexico. The overall outlook is stable to soft with prices expected to continue to erode in the coming weeks with limited activity and liquidity.

North America Urea Last Two Weeks

According to Green Markets, last week, NOLA urea barges were reported at USD$520-$530/st FOB, softening from the week-ago USD$508-$550/st FOB. Sources said the prior week’s prices had shot up to USD$550/st FOB after news broke of the new Indian tender. However, that news soon lost its luster and prices were once again on the decline at NOLA and at major inland US price points. Players had much broader price ideas for December cargoes, reporting USD$535-$570/st FOB.

This week, early-week NOLA urea prices inched lower, to USD$515-$525/st FOB from the week-ago USD$520-$530/st FOB. Prices could dip further after players digest the lower prices offered in the latest Indian tender

Last week, Urea prices were down significantly in Western Canada. Sources quoted delivered pricing in the C$1,040-$1,060/mt range, below the previous C$1,110-$1,130/mt DEL level, while FOB offers fell in the C$1,025-$1,060/mt range, down from C$1,085-$1,135/mt FOB in mid-October.

This week, Urea prices in Western Canada saw a large distributor offer January C$1080/mt delivered to farm. Does it sound like a long inventory situation?

North America Phosphate Last Two Weeks

According to Green Markets, last week, Sources described a quiet week for the NOLA phosphate markets, noting limited movement in the 30-day trading window. DAP barges were reportedly trading at a low of USD$675/st FOB, below last week’s floor of USD$685/st FOB, while the high end of the range slipped to USD$680/st FOB from last week’s USD$705/st FOB level. Market players reported minimal nearby trading activity in the MAP market. Business was reported at USD$650/st FOB for December-loaded barges, even with the week-ago USD$650/st FOB low for November loadings, while price ideas at the top of the range tracked around the USD$665/st FOB mark, down from USD$700/st FOB in the prior report. Domestic producers were reportedly sold out of barges loading through the first half of December, while offers on barges slated for full December loading were under evaluation. Historic low water levels on the lower Mississippi River continued to limit cargo capacity, resulting in an increased focus on tons either stationed at upriver locations or currently moving on a tow. The limited freight capacity contributed to thinning warehouse supply, however, supporting prices at levels above currently available NOLA netbacks. The nearby NOLA DAP barge market was reported at USD$675-$680/st FOB for the week, below last week’s USD$685-$705/st FOB range. Sources pegged NOLA MAP pricing at USD$650-$665/st FOB, also down from the USD$650-$700/st FOB level reported one week earlier.

This week, the NOLA DAP/MAP barge market was quiet. However, like nitrogen and potash, phosphate price expectations were lower.

Last week delivered MAP prices in Western Canada slipped to C$1,220-$1,260/mt FOB in Western Canada, depending on location, with delivered pricing reported at C$1,235-$1,270/mt. Those levels were down from the last reported ranges of C$1,238-$1,285/mt FOB and C$1,270-$1,280/mt DEL. “Most buyers seem to be waiting, hoping for lower prices before they step in for larger winter-fill purchases,” said one regional source.