With changes in production around the world, fertilizer and commodity prices have fluctuated significantly in the last eight to 12 months.
Josh Linville, vice president of fertilizer at Stone X, says it depends on the market, but just about everything today has a very bearish slant to it. When you look at the nitrogen market prices have fallen significantly. Urea, for example, is a third of what it was 12 months ago and it’s starting to get a little bit of a slant at how much more can it really go down. He says there are a lot of worries globally and fertilizer is a global market. (story continues below)
Looking at European production, Linville says natural gas prices are down but production remains at 60 per cent, which is less than normal. Chinese exports improved in December, he says, but we don’t know if this will last all year or if they’ll scale back. Finally, Russia is a major exporter of every single product out there, says Linville, and if they continue to take steps into Ukraine and anger the world, it will continue to affect fertilizer markets.
In this interview, Linville also dives into what is going on in the broader commodity market. He says he’s watching the correlation between nitrogen prices, corn prices, and acres. Linville says that the price has gone down quite a bit, making buyers more reluctant, and if we stay in this pattern, nothing changes.
If we get China back in the mix, and if Russia changes course and European production picks up, the narrative is still bearish, but it’s a whole new marketplace, says Linville.
Looking forward to 2024, Linville says that buyers are getting frustrated about the lack of access to fertilizers beyond the spring season.
Where does North America’s nitrogen prices sit relative to the rest of the world? Linville says our prices are about even with the rest of the world. We have even been able to get phosphate at a bit of a discount and potash is all over the place. Linville says “it is one of those things where you might have countries get out of sync from the rest of the world but they’re drawn back and right now and I’d say we’re in line.”
Moving on to the production side, Linville says he does not think there will be much excess product. From their models there is a good idea of what new production looks like as it takes multiple years to build and get online therefore there is a fairly good idea what production looks like through 2025. He says they know what direction demand is going and think phosphate and potash will get tight in the next couple years as production versus demand get smaller and there will be less excess supply. Linville says things can ramp up in the supply side as promising things are happening in Africa and there’s a mine in Canada that could be restarted. The timeline on production start up is long, Linville says, these are long-term cycles.
Finally, Linville says wheat markets in general have been very good and canola has been phenomenal. Looking at canola price versus urea, the numbers offer some of the best value seen in the last two-and-a-half decades. Linville says this is due to the canola market strength as fertilizer prices rise. He says the biggest difference between this year and last year is the loss of exports from Russia and China causing supply decreases.