Fertilizer market looking up
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As evidenced by the dramatic drop in revenues at Potash Corporation of Saskatchewan, the fertilizer business has taken some serious hits during the global economic crisis. The unprecedented volatility in the fertilizer market took economists by surprise, but in the face of tightening budgets, many farmers opted to cut corners wherever possible – in many cases, forfeiting the fertilizer and trusting to chance.
But while the fertilizer industry has decidedly hit a rough patch, industry experts are confident that the market is – slowly but surely – coming back around.
Although demand is expected to make a comeback in the face of the improving economy, fertilizer costs are not expected to jump. As nutrient production increases over the next 5 to 10 years, it is anticipated that costs will remain competitive.
In the potash department, Canada has a comfortable stash at its disposal – an estimated 1000-year supply at current consumption levels. Potash is expected to recover to 2007 demand levels this year, and is projected to recover more quickly than other nutrients.
Phosphorus demand has declined by 10% on the global market, but is expected to make a rebound of about two-thirds of that loss. While many manufacturers have reduced their inventory of phosphate during the market slump, prices of this nutrient are expected to remain stable.
Sulfur, a key ingredient in many fertilizers, is likely to go into surplus in the coming year, keeping prices low. While it used to obtained through mining, sulfur is now easily produced through energy refinement – it’s a natural byproduct.
No new ammonia capacity is expected to come online in the U.S. this year, especially after the volatile market shut many ammonia plants down, but natural gas for nitrogen-based fertilizers is still expected to be plentiful. A significant variable, however, is the potential for a rapid price hike. Climate change legislation demanding the use of cleaner fuels could increase imports, thereby raising ammonia prices for farmers.
And speaking of nitrogen, low prices and the global expansion of corn acreage for ethanol production means that nitrogen demand should sharply escalate this year. However, with less pre-booking of this nutrient during the fertilizer market slump, some suppliers may now find that they are subject to the whimsies of market demand in trying to stock this nutrient.
