By: Editorial Team, StoneX Media
Across the fertilizer complex the supply stories are alarming. Two thirds of the world's tradable sulfur supply is missing, China has all but stopped exporting DAP and MAP after shipping 10 million tons in 2021, and European nitrogen plants are still running about a quarter below capacity. Potash sits outside all of that, comfortably supplied and with more production coming online, and the price has still not softened. The reason is freight, the one cost that touches every ton of fertilizer moved anywhere in the world.
Josh Linville is Vice President of Fertilizer at StoneX, where he leads the firm's analysis of global fertilizer markets from Kansas City, covering nitrogen, phosphate and potash as one connected system. That cross nutrient view is what separates a genuine supply problem from a delivered cost problem, and in potash the distinction is the whole story.
Nitrogen and phosphate are both carrying genuine supply damage. Sulfur, one of the two major inputs to phosphate production, has lost about half its tradable supply behind the Strait of Hormuz and another 17 percent to a Russian export ban, and Linville is blunt about the scale of it. "Two thirds of that tradable supply is missing. This is impacting every manufacturer around the world". Potash has none of that. "Potash supplies are still good. I would dare say great. There's a lot of supplies versus demand out there. There's a lot more production that's coming online".
"The one thing I think that's truly hurting potash is freight". The comparison he reaches for is the fuel pump, where filling a car, a truck or a semi costs substantially more than it used to because of the war in the Middle East. Moving fertilizer works the same way, and it applies to every mode at once. "It costs more to move a railcar. It costs more to move a barge. It costs more to move a vessel, costs more to move the truck. And I think it's what's really helping to hold up that potash price".
Potash producers are not in distress. They are simply earning less than North American nitrogen manufacturers, and that gap decides how much of the transport bill they can swallow. "They are going to try and pass some of that freight cost along. They can't eat the entire thing". In his view the relationship does not run cleanly in reverse either, because easing freight would not automatically drag the price down with it, particularly with fall application only a few months out. What potash does offer, he adds, is calm in a market that has very little of it. "It is a safe fertilizer if there is such a thing today".
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--- Written by Gus Farrow, Senior Manager, StoneX TV
--- Expert: Josh Linville, Vice President of Fertilizer, StoneX
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