Photo by Markus Winkler on Unsplash
 

Contrary to last year’s forecasts, all CME fertilizers are now lower on an annual basis. Both DAP (Di-ammonium Phosphate) and MAP (Monoammonium phosphate) are lower. Both are around 3% lower, while the compound “10-34-0” plunged by 8%. At the same time, UAN32 is 10% lower, potash is 12% less expensive, UAN28 is 13% lower, anhydrous is 17% less expensive and urea is 22% lower compared to a year ago.

DTN is the stats' aggregator that gathers fertilizer price bids from agriculture retailers each week to compile the so-called DTN Fertilizer Index. DTN first began reporting data in November 2008.

Retail fertilizer prices tracked by DTN show prices are the lowest they have been in 15 months. Prices tracked by DTN for the fourth week of January 2023 eyed that retail prices were continuing to decline significantly. This trend has gained momentum since the beginning of 2023.

All in all, prices of 7 of the top 8 fertilizers dropped on a monthly basis. Five of the 7 fertilizers saw significant price downturns, where “significant” is referred to by DTN as when a given price changes by 5% or more.

In the same vein, nitrogen fertilizers are 11-12% cheaper than last month, with an average price of $523/ton. UAN28 is also significantly down.

Potash, Anhydrous, and HAN32 are also down, by over 11% over the past month. Potash prices averaged US$714/t, anhydrous potash at US$1,237/t and HAN 32 at US$630/t.

Urea (Urea FOB US Gulf Mar '23 (JCH23)) is 16-17% cheaper than last month. Its average price is $360/ton.

Looking back over the past month, both DAP and MAP are down profoundly. DAP averaged $617.50/ton, while MAP was $724/ton.
 

Summary:

Natural gas (one of the most significant costs of nitrogen and phosphate fertilizer production) along with energy prices were really high in Europe last year, which sparked a hard rally across the entire commodity group. However, recently, they have started to come down, so one of the key elements in a correct forecast of future price moves lies exactly in the prediction of natural gas prices’ trajectory. This is an extremely hard task given the traditionally high bias toward geopolitical interpretations – particularly, the forecast of the efficiency of the price caps imposed on Russia due to sanctions. 

However, since all known uncertainties prevail – not only the conflict between Russia and Ukraine but also the fact that China halted exports and shut down some of its phosphorous production – as farmers in the Northern Hemisphere approach the planting season – there is building evidence that fertilizer price recovery (not rally yet!) will resume sooner rather than later. 

Russia, Belarus, and Ukraine are important players in fertilizer exports around the world. Russia exports just over 15% of the world’s urea, along with more than 30% of the world’s ammonia, and about 18% of the world’s sulfur fertilizer. In addition, Russia produces and exports about 8% of the world’s Di-ammonium Phosphate (DAP). Ukraine normally exports 4-5% of the world’s urea, but this year, due to the halt of many chemical factories caused by the destruction of the country’s power lines and end-point transformers, it may export nil. Belarus, in its turn, puts out substantial volumes of muriates of potash, as well. These factors suggest that we are likely seeing, right now, that fertilizer prices are bottoming out.

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