This interview was recorded on Wednesday, February 23, the day before Russia invaded Ukraine, an action that has since closed key ports for grain movement and disrupted fertilizer supply chains out of the region. We considered not posting this audio interview because the situation has changed so dramatically; however, much of the discussion is still relevant, only more extreme than before. Please keep the timing in mind while you listen.
Andy Jung, director of market and strategic analysis for the Mosaic Company, says that fertilizer markets now are similar to the 2007/08 market in price only. The fundamental drivers of what’s at play in the market are very different, and a crash like 2008 is unlikely.
That’s because the 2008/09 pull back was mostly predicated on commodity prices really plunging in the summer of 2008. Demand for fertilizer products and other inputs waned soon after, Jung explains.
“We’re not seeing that this time around. In fact, we’re seeing the opposite; commodity prices continue to rally, therefore, demand is, is quite strong. And more importantly, of late, is some of these supply disruptions that we’re seeing around the world, some of which are related to geopolitical tensions. We did not have those types of very significant or potentially very significant supply disruptions back in 2008, or 2009, that we’re seeing today,” he says.
Strong demand for fertilizer and pinched supply chains will continue to push fertilizer prices higher. (Editor’s note: as we saw first hand February 25th)
“Russia is a major supplier of nitrogen fertilizers from an exporting standpoint,” Jung says. “The numbers vary by the type of nitrogen product, but they are a very major player. They are also very significant exporter of potash. And even from a phosphate standpoint, they’re they’re meaningful. They’re not as large an absolute volumes as they are in and or in potash. But they are a significant player in that market as well.”
There has been significant moves by the U.S. to level the playing field on fertilizer pricing, including applying countervailing duties on imported product. (Story continues below)
“We think that it’s made the market here in North America much fairer and currently traded in terms of volumes. Phosphate fertilizers is what Mosaic brought a countervailing duty petition against two countries of origin: Morocco and Russia, and the ITC and the Department of Commerce ruled in the affirmative last year,” he says. The result has been not just more product being imported, but more players in the market — creating a more competitive landscape, he says.
He adds that commodity markets in general are quite bullish.
“We’ve discussed the potential for disruption to fertilizer due to geopolitical tensions on the other side of the world. The same goes from a grain and oilseed standpoint, one looks at Russia and Ukraine, each of them has about 8 per cent of global exports of grains and oilseeds. If these disruptions to fertilizer do indeed occur, it would be surprising that disruptions to the grains and oil seeds wouldn’t occur at the same time, and any disruption to the grain and oilseed supply would lead to higher prices.”