Phosphate and potash
While most of this series has related to nitrogenous fertilizers, let’s shift our attention towards phosphate and potash fertilizers.
Retail prices have been falling
On October 25, phosphate and potash fertilizers traded at $589 and $533 per metric tonne. The two fertilizers saw large declines in September as crop prices fell and wholesale prices for the two fertilizers fell in mid-summer due to the breakup of a partnership between Belaruskali and Uralkali—two of the top-five potash producers.
Taking advantage of the current situation
As competition rose, countries like China and India have taken the opportunity to negotiate or renegotiate contracts at lower prices. While the impact on retail prices wasn’t immediate, as people were probably in wait-and-see mode, farmers’ caution eventually led to a collapse in US potash retail price in September. Lower potash purchases and an oversupplied phosphate market also negatively impacted the sales of phosphate fertilizers.
But the downtrend could be ending
Despite recent trends, most producers don’t expect wholesale fertilizer prices to fall much farther over the medium to long term. If prices do fall, they believe that China and India will increase purchases and support prices. Production cuts should also support prices. As retail fertilizer prices often follow wholesale prices, this case would be positive for Agrium Inc. (AGU)—a major player in the retail business.
A halt in wholesale prices would also be positive for potash and phosphate producers like Agrium Inc. (AGU), Intrepid Potash Inc. (IPI), Mosaic Co. (MOS), and Potash Corp. (POT). The Market Vectors Agribusiness ETF (MOO) should also benefit.
© 2013 Market Realist, Inc.