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Fertilizer markets face a perfect storm, explains Josh Linville, Vice President of Fertilizer at StoneX, in a wide-ranging interview on supply, trade policy and pricing pressures.
“It looks like they're going to be looking for about 1.5 million tons of urea”. Although the headline figure shocked casual observers, Linville notes the purchase was widely anticipated the moment India fell short on its previous tender. Shipment by end-July means offers and awards over the next few weeks will “go a long way in determining the global path of urea values.”
China normally ships 9-10 Mt of phosphate a year, yet “every sign is indicating the Chinese government is only going to allow 4 million tons”. Last year’s 6.6 Mt was already tight; the new quota removes another key outlet. With India paying US $730-750 CFR and showing no sign of stepping back, Beijing’s policy all but assures continued global supply strain.
Phosphate supply hinges on a handful of nations—China, Morocco, Russia, Saudi Arabia and the United States. Duties keep Moroccan and Russian tons out, while a long-standing tariff blocks Chinese product. Now a US court has ruled the Saudi tariff “illegal,” but Linville warns another judge could reverse that finding, adding “uncertainty to the marketplace, which is of course supporting values” . Until clarity emerges, importers face steep hurdles, leaving domestic prices elevated.
With spring application finished, prices would normally ease. Instead, New Orleans barge values have climbed US $50 t since season’s end. Linville points out the phosphate-to-grain ratio is “the second highest we've ever seen… the only time it's been worse was 2008”. Back then, corn fetched US $6-8/bu, giving farmers room to absorb costs; today, roughly US $4.50/bu offers far less comfort. In short, absent a policy shift or unexpected supply surge, buyers may have to live with historically stretched ratios well into the summer.
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---- Written by Gus Farrow
--- Expert: Josh Linville, StoneX VP - Fertilizer
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