Home > Rabobank’s Q3 report for global fertiliser industry indicates price support with limited upside

Rabobank’s Q3 report for global fertiliser industry indicates price support with limited upside

Supplier News

Agribusiness banking specialist Rabobank has released its fertiliser report for the third quarter of the year.

Rabobank Fertiliser Quarterly Q3 report indicates some positives for the fertiliser industry with prices slowly rising from the floor levels witnessed earlier this year; the price support is largely driven by both intentional and unintentional supply reductions.

Seasonal demand, mostly from China, India and the US, is unlikely to sustain this rise in prices for the fertiliser complex, while risk averse sentiment in global commodities is restricting stock accumulation across the fertiliser chains.

Rabobank believes that bearish commodity prices will have limited impact on input use in the short term, though farmers could reduce fertiliser applications in the medium term as margins come under more pressure.

Regional Outlooks:

United States

Logistical bottlenecks caused by congested barge and rail markets are likely to become the key driver for US fertiliser prices due to higher barge freight costs and rail companies struggling with backlogs. Fertiliser stocks have decreased throughout the supply chain and retailers will now be looking to replenish ahead of autumn application, leading to an increase in demand and, consequently, prices.

Brazil

Brazil is sitting on comfortable stocks thanks to improved fertiliser imports in the first half of the year, limiting the need to import significant volumes this quarter. Rabobank expects Brazilian fertiliser demand to increase between 3% and 5% in 2014. Farmers are most likely to reduce input use in Safrinha corn and, to a lesser extent, soybeans.

China

Autumn applications beginning this month are driving urea prices in China higher. Price support is expected to continue considering the stronger seasonal domestic and global urea demand; however, it is unlikely to sustain going forward. Oversupply is still looming over the Chinese urea markets and is likely to provide bearish undertones to global prices when seasonal demand fades.

EU

While European fertiliser markets are still not very active yet, increased activity from September onwards could cause more upward price pressure in already thin global potash markets. Some pre-planting and supply fill buying is occurring, but major nitrate application will not occur until spring. A weaker euro is making imports in US dollars more expensive.

India

Global urea demand will most likely be driven by India in the coming months. Tight supply outside of China and managed supply in China will likely increase India’s import price for urea. By contrast, India’s potash and phosphate demand might fall during the next quarter due in part, to further depreciation of the Indian rupee adding pressure on importers’ margins and the impact of weak monsoon rains, which are on average 66% behind year on year volumes, capping prices.

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