Nearly 500 industry representatives gathered in Twin Falls, Idaho, for the Far West Agribusiness Association conference on Jan. 5-7. The event’s opening day keynote address was given by Neil Fleishman, senior industry analyst for Green Markets, who said lower commodity prices and a strong U.S. dollar could strain global fertilizer demand in 2015.
Fleishman said the supply and demand structures are still set to loosen across all major nutrients in 2015. He said demand growth and prices for potash and phosphates in 2015 could be challenged by lower crop prices, while demand for nitrogen products is likely to stay steady.
Fleishman said potash demand in 2015 is most at risk due to lower commodity prices, particularly in North America, but he projects steady demand if product is available “at the right price.” Going forward, he described the global potash market as “controlled oversupply.”
Fleishman also projected a “neutral” view on phosphate pricing in 2015, noting that the market should be well supplied. He said lower commodity prices present a “challenge” to DAP/MAP demand, but a radical drop-off in usage is unlikely.
As for nitrogen, Fleishman presented a “neutral to cautious” view on ammonia prices in 2015. “While ammonia prices have likely peaked, continued curtailments in the near term will likely keep ammonia prices high relative to urea," he said. He said urea capacity will begin to expand outside of China in 2015 with global projects taking shape, resulting in a urea oversupply for the foreseeable future that will likely cap prices.
Fleishman elaborated on these global nitrogen capacity expansion, noting that the market will see increased localization as a result. He detailed the many nitrogen projects slated for North America, claiming that “more projects will likely go ahead than the market expects.” As a result, he said North America is “currently poised to become self-sufficient in both urea and UAN, while ammonia imports could drop by two-thirds.”
Fleishman stressed the importance of India in the global supply and demand picture, noting that the country is an “unpredictable buyer,” and that its imports “continue to disappoint” because of a weak currency, an unbalanced subsidy scheme, and late monsoon rains. He cautioned attendees to keep a close eye on the Indian nutrient based subsidy (NBS) program, noting that any changes could quickly impact global prices.
As for China, he said the country showed strong potash imports in 2014 and demand is expected to remain strong in 2015 as well. China’s urea and DAP/MAP production and exports remain governed by oversupply, however.
Closer to home, Fleishman said ongoing logistics challenges will likely impact domestic distribution again this year. He said this problem is compounded by “lean inventories” at the terminal level, so he cautioned attendees to “plan for longer lead times.”
Fleishman noted other major economic themes as well, saying lower oil prices could impact economic growth in the U.S. as consumers opt to save or pay down debt. He said the natural gas outlook is unchanged by the lower oil prices.