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Surprise purchase & increased production affect the fertilizer market

A fertilizer expert says a large purchase of urea overseas shook up the market. 

Josh Linville with Stone X tells Brownfield India followed a large purchase of urea with a tender offer for an additional one million metric tons. “We just thought that announcement would come in the middle or late December, but after that 1.5 million ton purchase, global values were under pressure, prices started to fall, and India was aware that, hey, once we get into Q1 (quarter one), there’s a lot of world demand that steps up, so why don’t we take advantage of this.”

Linville says India’s earlier-than-expected purchase shocked the system and caused urea prices to rally.  He says with the price rally, he would not be surprised if India backed away from the new purchase. “I don’t know that that’s what will happen, but I think that’s one of the scenarios we need to watch for that would absolutely pull the rug out from under this urea market.”

As far as the potash and phosphate market goes, Linville says availability still looks good with Chinese exports of phosphate up and potash is readily available because of ramped-up production in Canada and new mines expected to open in Russia. “We are seeing values drop in the Gulf of Mexico. We’re seeing it drop around global values, but the problem is as it’s been dropping, the inland prices don’t move a whole lot because it’s costing so much more to move that product from point A to point B.”

Linville says the lower river levels and the related lighter barges have made it more expensive and less efficient to move fertilizer, impacting basis levels more as you go upstream from New Orleans.