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Rabobank expects fertilizer prices to remain low over next six months

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World Fertilizer,

The plummeting cost of raw materials, growing production capacity, and mediocre demand have pressured global price indicators of nitrogen, phosphate, and potash to fall either to or near ten-year lows.

Decreasing energy prices have been one of the biggest impacts of Covid-19 on the fertilizer complex, according to Rabobank’s Semi-Annual Global Fertilizer Outlook. Reduced mobility and restrictions have forced prices of natural gas and, to a lesser extent, coal down 46% (UK NG ICE) and 11% (ZCE Thermal Coal), respectively. Both of these raw materials are critical to the production of urea and processed phosphate. While this has led to lower input costs for many farmers, prices for commodities such as corn and palm oil led to little gain in farmgate margins.

Heavy supplies of all nutrients continue to weigh on prices. Late in 1Q20, uncertainty created a lift across most international price benchmarks. DAP increased 16% (US Gulf) during February and March in response to shutdowns and the associated supply risk of Chinese phosphate. Once Chinese production resumed, prices again quickly retreated.

“We expect that there is little upside for prices over the next six months across the nutrient complex. With relatively cheap inputs, utilisation remaining at low levels, and our outlook for commodity prices also staying low, we expect this low price environment will continue for at least the next six months,” according to Matheus Almeida, Senior Analyst – Farm Inputs.

A Covid-19-related interruption to global production and/or supply chains remains the most prominent risk for fertilizer prices over the next six months. At the farmgate, this may lead to sharp, short-term price rises, if shortages arise.

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