International factors are pushing up the price of nitrogen fertilizer.
In the middle of summer, urea fertilizer, 46-0-0 could be purchased in the $650 to $700 a tonne range. The price is now approaching $800 a tonne and if suppliers need to access more nitrogen for farmers, the price looks like it will go even higher. Greg Kostal is a longtime market analyst. His firm, Kostal Ag Consulting is now part of Grainfox.
In a recent report to subscribers, Kostal explained how actions of the big international players are pushing up urea prices.
“Commodity prices are a big factor but when you look internationally there are other components that are driving the bus that have greater relevance. China’s export policy and behavior is one of the top four – they’re the world’s biggest discretionary exporter. They have been retaining fertilizer and have not been exporting in a big way, and by the way, while the rest of us tend to look at natural gas prices, their economics is based on coal. Second thing is India import policy and behavior – they’re the biggest discretionary importer and they subsidize imports, so the supply-demand is skewed just from those two variables alone. We got to follow natural gas price trends and Europe is only producing at maybe 75 per cent capacity and then of course all the random geopolitical events that impairs logistics and movement, so supply has just not had a chance to catch up to demand or availability.” Kostal said.
Kostal says India is re-tendering at a higher price in an effort to get more supply. In North America, it is possible that higher prices will reduce demand. However, U.S. corn acres are expected to increase and corn needs a lot of nitrogen. No one can predict what China may do with exports or what India will do with subsidized imports going forward and the tariff threat issue is a big wild card.
However, Kostal believes urea prices will likely continue increasing until seeding is complete. Occasionally, fertilizer is cheaper in the spring that during the previous summer and fall, but this does not look like one of those times.