I will say this now and will say it going forward to eternity: these are the flat price graphs for each individual location. Your price where you are is going to be different. There are logistics. There is the cost of storage/interest/insurance/etc. These graphs should not be taken as "it shows the price at $700, why isn't my price $700". These graphs should be used to give an appreciation for price movements.
All values are in metric tons and USD currency.
Global
Summer is coming quickly and hopefully so too will Chinese exports. If that plays out, the lowest demand period of the year is coming quickly and the world's typically largest exporter is coming back. That's a big one/two punch.
I continue to believe we will see softer phosphate prices ahead. There is a long period until the next large demand cycle and China returning will only highlight that point.
North America
Well, hopefully everyone survived the spring. It wasn't easy as many reported issues on getting their hands on resupply. That should mean that we will finish this fertilizer year/start the next fertilizer year very low on inventories (win for manufacturers). Also, hearing that U.S. duties against Morocco and Russia are set to rise, not fall or be deleted (another win for manufacturers).
Even with those seller wins, there is reason to believe values could fall. Current phosphate values, while much lower than spring high's, are still high priced vs grain values. There is a long summer/fall ahead before November application begins. High interest rates will be something to content with. Farmers are not in great moods when looking at 2024/25 profitability.
Even with values down substantially from their spring high's, we continue to believe that lower values are ahead. However, the bottom side range has been elevated with duty rates and low ending inventories.
While the fertilizer futures market is far from as liquid as its grain counterparts, it is still active and gives us an insight into what the market is thinking.
Please note that the values below can and will change daily. This is merely a look at where they are as of writing:
Global values start to fall as Chinese exports expected to resume
As I've mentioned many times in recent history, China is extremely important to the strength or weakness of the global phosphate market. As the historic leader of exports, their absence and presence is felt. In recent months/years, global phosphate markets have been priced high as China restricted exports in an attempt to keep domestic inventories plentiful and domestic values low. Now that it looks as though exports are set to resume, global values are starting to decline.
However, as with everything China, there needs to be a word of caution.
For starters, the world is still a bit tight supplied because of China's absence. It isn't as though the global S&D becomes oversupplied the first day China returns. It is going to take time and work to get back to normal. A lot of the price correction has to do with anticipation and emotion.
That brings us to the second point which is we never know what China is going to do. They were not going to return to the export market...until they did...but maybe they do not again. This is the problem with China in the phosphate market. They are the largest exporter in the world...and we play defense from an information standpoint. We can expect things to happen but must always remember how quickly it can change.
All in all, right now it does look like they are coming back. Reports/rumors/statements all lead to that scenario. Global price direction does the same.
Just have to continue to watch in case it changes.
N.A. values finally correct...but too late for spring
In real estate, the 3 most important factors are location, location, location.
In fertilizer, your location in relation to supply is important...but so to is timing.
NOLA phosphate values have FINALLY started to come off. In early March, NOLA DAP physical barges reached a high value trade of $690. This was during peak demand when supplies were hard to come by. Since then, values have been sticky.
Well, the sell off finally happened. Recently, those same NOLA DAP price ideas have been around $500 or almost $200 lower. That is a major step lower!
...unfortunately, it is too late for spring demand...
As you can see below, there is a huge discrepancy between NOLA/global price movements over the past month and inland values. That is due to the market still catching up on supplies.
Last fall and this spring were some of the tightest inventoried markets that I can remember. I heard from a ton of folks who struggled to get their hands on resupply in a timely manner. Even when NOLA values started to drop, folks were saying that if they needed more product, they were being told you can have this extremely high price out of this location when this barge/rail/truck specific load arrives and not a moment sooner. Oh, if you do not like the price, I'll hang up and sell it higher to the next person.
Unfortunately, it has been that time of year where the local S&D matters a lot more than the rest of the world.
Now, values falling is a great sign that opportunities may be ahead...but those opportunities are likely going to be for summer fill and/or fall shipments.
Rumors that U.S. duties against Morocco/Russia set to RISE
I have started, stopped and restarted this section a few times in an attempt to keep my emotions in check.
As of the morning of this writing, we have heard that the U.S. commerce department is going to proceed with raising the duty rates on Moroccan and Russian produced phosphate imports. While not a surprise, I had hoped that they may take into account how tight inventories have been and remove the rate at least against Morocco. Guess that wasn't meant to be.
So what does that mean for the U.S. / N.A. markets?
- Manufacturers are able to have their cake and eat it to. If the domestic market is willing to pay up for product, they can keep the product here. If the domestic market does not want to step forward, they now have the ability to export. It should remove most chances of N.A. moving to far below the rest of the world.
- N.A. values will need to ebb and flow with the rest of the world. Just because we have effectively cut 3 of the largest exporters in the world does not mean our price will disconnect. There are other exporters out there, they are just nowhere near as large a player. If N.A. moves to a too high premium, imports should show.
- It raises the chance of extreme tight inventories. With manufacturers still having the capability of exporting, if the domestic market refuses to step forward to secure tonnages, exports can/will occur. That happens enough, supplies will be tight when buyers come forward and the market will move to desperation trying to replace.
In the end, Morocco and Russia have not been big suppliers of phosphate recently so this doesn't change the fundamental aspect. This is more an emotional situation. Still, I had hoped for a small miracle.
Summer expectations
The long story short is that values should continue lower around the world...but to what end?
Globally, the biggest bear point is the return of Chinese exports, that is if they return. It's China, after all. Their return signals the return of the biggest competitor in the market which should pressure price ideas. There will still be a certain amount of catch up being played from the supply side but the bearish trend should be there.
For North America, I had hoped that we would see values even lower than last summer's lows. Global values should be under more pressure and I hoped at least Morocco's duty rate would be removed. Now that it appears the rate removal is not part of the equation, that firms things. So we will start the new fertilizer year low on inventories and without 3 of the largest exporters in the world coming.
On the flip side, farmer profitability is nowhere near as good as it has been, and that will put buyers in a poor frame of mind. It is really hard to spend money when profits are not there. Then, looking at current phosphate values vs grain prices, phosphates are still too high. There just isn't a lot of reasons to want to step forward.
Originally, I had expected that we would see the market $25 - $50 lower than last summer...but I'm losing faith. Today, I'm in the mindset that if we can repeat last summer's values, we should count that as a win.
NOLA/New Orleans, Louisiana DAP price comparison
Number 5 global exporter in 2022
Price comparisons
Vs 30 days ago - -17% or approximately $100 lower
Vs 90 days ago - -17% or approximately $100 lower
Vs 6 months ago - -8% or approximately $40 lower
Vs 1 year ago - -24% or approximately $155 lower
U.S. Midwest Average (using multiple points across Midwest) price comparison
Vs 30 days ago - -4% or approximately $30 lower
Vs 90 days ago - +3% or approximately $18 higher
Vs 6 months ago - +1% or approximately $9 higher
Vs 1 year ago - -6% or approximately $43 lower
U.S. Northern Plains Average price comparison
Vs 30 days ago - -4% or approximately $29 lower
Vs 90 days ago - +6% or approximately $40 higher
Vs 6 months ago - +11% or approximately $66 higher
Vs 1 year ago - -9% or approximately $63 lower
U.S. Southern Plains Average price comparison
Vs 30 days ago - -6% or approximately $40 lower
Vs 90 days ago - unchanged vs 3 months prior
Vs 6 months ago - +2% or approximately $14 higher
Vs 1 year ago - -13% or approximately $94 lower
Morocco DAP price comparison
Number 1 global exporter in 2022
Price comparisons:
Vs 30 days ago - -1% or approximately $4 lower
Vs 90 days ago - -2% or approximately $10 lower
Vs 6 months ago - -4% or approximately $25 lower
Vs 1 year ago - -1% or approximately $5 lower
Black Sea DAP price comparison
Number 3 exporter of DAP/MAP in 2022
Price comparisons:
Vs 30 days ago - -1% or approximately $6 lower
Vs 90 days ago - -2% or approximately $10 lower
Vs 6 months ago - -2% or approximately $12 lower
Vs 1 year ago - +3% or approximately $17 higher
India DAP price comparison
Number 1 global importer in 2022
Price comparisons:
Vs 30 days ago - -8% or approximately $44 lower
Vs 90 days ago - -12% or approximately $70 lower
Vs 6 months ago - -12% or approximately $69 lower
Vs 1 year ago - -3% or approximately $19 lower
China DAP price comparison
Number 2 global exporter in 2022
Price comparisons:
Vs 30 days ago - -8% or approximately $48 lower
Vs 90 days ago - -10% or approximately $61 lower
Vs 6 months ago - -10% or approximately $58 lower
Vs 1 year ago - -1% or approximately $7 lower
Saudi Arabia DAP price comparison
Number 4 global exporter in 2022
Price comparisons:
Vs 30 days ago - -13% or approximately $82 lower
Vs 90 days ago - -11% or approximately $63 lower
Vs 6 months ago - -10% or approximately $60 lower
Vs 1 year ago - -3% or approximately $18 lower
Brazil DAP price comparison
Number 2 global importer in 2022
Price comparisons
Vs 30 days ago - -1% or approximately $5 lower
Vs 90 days ago - +1% or approximately $5 higher
Vs 6 months ago - +1% or approximately $5 higher
Vs 1 year ago - -1% or approximately $8 lower
- China isn't guaranteed to stay in the market – just because the expectation is that they will return does not make it gospel. We have seen them do a 180 before and they could certainly shock the market if they deem it necessary. China is going to think of China...not the rest of the world.
- Global inventories are tight with China's absence – if China returns, it will be a huge win for global bears but it does not mean the global S&D corrects immediately. That takes time and does not happen on day 1. Until more time is allowed to pass, inventories will still be snug.
- U.S. duties being increased cuts imports – well, so much for hoping. Now that it sounds as though import duties are being raised, hope of Morocco returning is dashed. This means the U.S. is now dependent on Saudi Arabia and the remaining small global exporters. This makes it harder to resupply and puts more power in the hands of domestic producers.
- China should return – all indications are that Chinese exports are set to return. While it will take time for the global S&D fundamentals to get back to normal, the emotional impact will be immediate.
- Phosphate values are simply too high vs grain values – phosphate has remained very high for a very long time vs grain pricing. That remains in effect for today. There should be little excitement from the farmer side at current values. That should mean delayed buying which should/could put pressure on sellers.
- Buyers are in a poor frame of mind – further to the last comment, profitability is just not there this year and next year does not look good. This is something that I think more are missing in the marketplace. Everyone has gotten used to profitable farmers. While they may not like the value of a product, they pull the trigger because they need to spend money. But do you need to spend money if you are not making money?
We believe that only looking at the flat price of either grains or fertilizer can be misleading:
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Only selling grain can hurt you if fertilizer prices rise substantially
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Only buying fertilizer can hurt you if grain prices fall
We look at the ratio "value" to get a better indication of where we are or how many bushels of X does it take to pay for 1 ton of fertilizer.
Would you rather:
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Spend 150 bushels to pay for 1 ton of DAP
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Spend 80 bushels to pay for 1 ton of DAP
When we compare the current ratio value against recent years, we start to see if we are high or low.
YOUR VALUES MAY LOOK DIFFERENT
This graph looks at the NOLA DAP price vs the flat grain price. There are no logistics on either product. Your location will look different due to fertilizer logistical costs, grain basis, etc.
- Chinese export programs - when the largest phosphate export does something, or doesn't do something, it affects the globe. China should be returning. That should be bearish. Unless they decide against it (like urea), then its bullish...isn't fertilizer fun!
- Grain price in relation to phosphate price - buyers are having to mind their p's and q's today more than they have in recent years. That means watching for opportunities and today, that phosphate/grain price opportunity is not there. Now, will it ever get there? Maybe not but this early in the calendar, it doesn't give any indication that a person should jump in early. If this mindset continues for a while, suppliers may have to budge.
- Ongoing U.S. countervailing duty - I do not think this story is done. Yes, farmers lost this round if the rate increases take effect. However, it is an election year in the U.S. Also, a lot of organizations have been fighting this situation. Doesn't mean anything will change, but the fight is still there to keep the story going.
StoneX Ratio Calculation
The ratio calculation is derived from Bloomberg historical grains values as well as fertilizer values from StoneX, NPKFAS, and Argus.
The calculation is simply dividing the fertilizer price by each grain price.
All data was sourced from StoneX unless otherwise noted.
