Two Important Factors For Fertilizer Prices This Spring
With spring fieldwork on the horizon, ICIS senior fertilizer editor Mark Milam describes the fertilizer market as “positively cautious”.
“I think the fertilizer side is more on the positive side and the farmers are more on the cautious side,” he says. “That’s because corn prices have been under a little bit of pressure and haven't been as rosy as they were in November and early December. And in the meantime, fertilizer prices are doing their traditional spring elevation.”
Milam shares that while the market appears to be in good shape at the moment, there are a couple of important trends moving forward this spring.
“How much fertilizer that’s in place for the spring is in question a little bit more and more,” he says. “I have a sense that products are well positioned to start the first part of the spring, but we might see some tightness right thereafter.”
Rain Needed For Shipments
A contributing factor to the supply tightness Milam predicts could come from river levels. And though wet springs aren’t conducive to getting equipment into the field, every drop of precipitation will be important to keep barges moving for spring shipments.
“Most people are hoping there will be just a little bit more wet to come before we really get underway with spring so that we're not immediately faced with a river slowdown or that they're forced to use other options like truck and rail. That would present an additional cost to people trying to move fertilizer product and be passed on to the farmers in the coming weeks,” Milam says. “It’s rained and snowed in places, and there’s more rain to come. So, we should see some relief by mid-February in the U.S. river system.”
If this relief doesn’t come, Milam says it could lead to low inventory and higher prices.
Behind on Inventory
Another component predicted to play a role in the market is fertilizer imports. Due to low wholesale barge prices last year, Milam says the U.S. is currently behind on import inventory and will need to fill the gap.
“There was no incentive to send products here, because they could send it to other markets and make more of a profit,” he says. “Now our prices are coming up as we're getting into spring. It's kind of steady right now but if it continues to climb, we'll start to see some price appreciation that will be attractive to global producers, and we’ll seize product.”
Milam adds he doesn’t expect the lower inventory levels to come into play until growers begin to side dress their fields. And as far as which products will be in most demand, he shares a projected uptick in corn prices could lead to increased consumption of nitrogen, phosphate and potash.
Price Outlook
For those who haven’t made their fertilizer decisions for spring yet, Milam advises it’s time to lock them in.
“I think we've already seen the price lows that we're going to see for right now,” he says. “There's not a lot of things that you can count on in this market, but when the temperatures get warmer, your fertilizer, fuel and other input options cost more as each week goes by.”
Tightness in supply from river levels or import inventory in the coming months will add to the traditional input price increases seen at the beginning of the season.
