The nitrogen fertilizer market is expected to remain firm heading into the ’24 planting season thanks to several global supply/demand factors, according to ADM Fertilizer’s Saskatchewan-based urea product line manager.
With natural gas prices in Europe having dropped precipitously from their highs in 2022, the nitrogen market has turned its attention elsewhere, explains Noah Bishop, in the interview below, following his fertilizer market update at Ag Days in Brandon, Man., last week.
Demand from India is one factor to watch between now and spring, with India having already purchased just over 650 thousand tonnes of urea to start the year. From a fundamental perspective, that should be enough to meet India’s demand, but domestic politics could be a factor, with a national election happening this spring.
“Typically in election years, we do tend to see some overstocking of urea,” notes Bishop. “So if we saw the Indians return to the market today, we would likely see increases in the cost of urea globally as it would tighten up the S and D. That’s that’s something we’re paying very close attention to.”
Government intervention in China is another factor to watch, as the Chinese government has restricted exports to bring down domestic nitrogen prices, he explains. “Our general expectation is that they will continue to keep exports relatively limited to stock domestic urea in that country ahead of peak demand [in spring]. But once we get into the second half of 2024, we would expect the Chinese to return to the export market.”
If the Chinese start to export more product earlier than expected, it could have a bearish impact on the urea market globally, he notes.
The third global factor to watch, especially in the near term, is the situation in the Red Sea, with attacks by Houthis in Yemen resulting in ships being diverted away from the Suez Canal around the Horn of Africa.
“Generally the market is aware of this and I think risk has been priced in to the fertilizer markets. When we look at the vessel freight market, we’re seeing less volatility or perhaps less concern, and so that is at least a reason to moderate our concern for this issue,” notes Bishop. “But I want to be very clear that if we saw a significant escalation where boats would no longer transit that waterway, it would add significant premiums to bringing product from east through the Suez to West or vice versa. Generally when issues like that occur, trade flows do adjust, but they only adjust after a period or spike of volatility and price.”
Listen to the interview below for more on the fertilizer market, including a rundown of the markets for all four macros — nitrogen, phosphate, potash, and sulphur, and whether lower commodity prices are resulting in any fertilizer demand destruction heading into the ’24 planting season: