Danil Sereda, June 01, 2022, quoting some blogger named Publius:
“Nitrogen prices did not fall. Only one kind of nitrogen fell, and only in one place. It is the monthly contract between Yara and Mosaic for Tampa delivery for the month of June. Ammonia and UAN prices in the US corn belt have not changed. Urea is down about 3% this week, but that’s it.
And the fall in pricing had nothing to do with demand destruction. It is seasonal. Nitrogen prices always fall when the Spring Planting season is over. Ammonia is not used (for fertilizer) from the end of May until about the end of October.
The other thing that I would point out is that the Tampa ammonia contract had been excessively elevated for the previous 3 months to the point that it was way over comparable Midwest ammonia pricing. This drop puts it right where it should be for summer pricing.”
“It turns out that the price drop, although it happened, actually had no reason to lead to panic. Seasonality is something that was not properly mentioned in the Bloomberg article and caused some mispricing in the market.
According to official data [Source: DTNPF], the prices of all types of fertilizers are significantly higher compared to 2021, and there are no sharp declines so far: …”
“As Russ Quinn, DTN Staff Reporter writes in the May 26, 2022, article, the average retail price for potash in the 3rd week of May 2022 was $878 per ton – double last year’s price and approaching the all-time high of $896 per ton reached in November 2008”
“I expect fertilizer prices to remain above their historical averages for a long time to come, if not rise even further. One reason for this was recently cited by Bank of America analysts as a possible ban on Chinese fertilizer exports.”
“China is the largest producer of nitrogen fertilizer in the world, and the country retains most of its production for its needs, which are growing year by year – the amount of fertilizer consumed to the amount produced domestically (in %), although inexorably declining, is still over 90%, which is quite a lot.”
So this time, against the backdrop of all the difficulties with logistics, new export restrictions seem an obvious move on the part of the Chinese Communist Party – world fertilizer prices, as we found out, have not fallen since mid-2021, and Chinese exporters, if not restricted, will try to sell their products at higher prices on international markets, jeopardizing the food security of their own country.
The CCP may likely scrutinize the major exporters – then the downward trend in exports will continue, and the price trend of fertilizers that we saw in 2021 threatens to be repeated.”
This is just one of the possible scenarios that I can foresee – it has every chance of not occurring. The question then becomes – will future demand be sufficient to allow fertilizer producers to continue to generate excess cash flows?
I think the answer to this question is yes. First, countries that restrict their exports are also major global importers, so they are going to import fertilizers from those countries that have not imposed restrictions. The very fact that they have imposed export restrictions speaks to the high demand in their domestic market – the U.S. and Brazil look like obvious beneficiaries of the current situation.”
So says Danil Sereda.
June 7, 2022 .
Hmmm…well, I am bottom fishing fertilizer stocks on weakness this morning. Looks like higher energy prices and the demand destruction drumbeat have mispriced the market again. Thats my belief. We shall see.