The new world order of fertilizer supply and pricing is due largely to a shift away from the manner markets have traditionally worked – this is the view expressed by Dag Tore Mo, Yara International ASA vice president, market analysis. Speaking at the Canadian Fertilizer Institute’s 63rd Annual Conference in St. John’s, Newfoundland, and Labrador Aug. 11-13, Mo said the fertilizer industry produced at over capacity for “a long time,” and now that grain stocks are at an all time low, the need for fertilizer has increased. For the decade between 1997 and 2008 the world did not need to produce more food, but the interest in using food as an energy source other than eating has led to shortages, he adds.
“In terms of phosphate rock, it could be bought for $40/t for the last 45 years and now it is selling at $400/t because there is a genuine shortage,” Mo told the crowd of industry insiders. When the United States reduced its exports of phosphate in 2007 the difference was made up by China, he explained, and the trend continues in 2008. “Phosphate trade is up 5.6 percent in the first quarter of 2008.”
Urea markets have been affected largely by political reasons in the past, Mo explained. The collapse of the Soviet Union, and China and India importing again, plus the expansion of low gas prices in the Middle East contributed to a “super down cycle” in the past decade for urea. “However, global trade in urea went up 20 percent in 2007 and it’s already up 21 percent in the first quarter of 2008,” Mo reported. “China is covering these increases with exports for now, but there are rumors that China intends to increase export tariffs by 50 percent, which would definitely affect the market.
“It’s hard to see how the world could survive without Chinese exports in the years to come because there are few new production facilities coming and those that are planned are having problems getting up and running.”
“Higher gas costs means it’s expensive to invest in new capacity, so it’s understandable there are few new projects in the pipeline,” said Mo.
With the fertilizer market being driven by the need for food, Mo reported the stocks-to-use ratio is at an all time low. While the global market appears to be satisfied that demand will be met in 2008, he suggested the grain crop in 2009 will have to increase because consumption continues to increase. “It is my hope that all farming sectors will have a good year,” he concluded.
In addition to Mo’s presentation on world fertilizer and an update on the success of North American agriculture, the conference also hosted a panel on world climate change and the affects agriculture – and, specifically, fertilizer – has on it. The panel consisted of topics on the science of climate change, action by Canadian farmers to mitigate change, responses to climate change in Europe, and strategies for managing fertilizer in support of mitigation. While the future of the planet was presented as grim unless changes are made, the work of Canadian farmers and the research around best management practices for fertilizer use put a positive spin on the topic as it proved the industry is taking the issue seriously and is working towards solutions.