Speakers at The Fertilizer Outlook and Technology Conference at the Grand Hyatt Tampa Bay in Tampa on Nov. 6-8 projected a rosy picture for both crop and most fertilizer prices well into the future. The meeting was a combination of The Fertilizer Institute’s Fertilizer Outlook Conference and the Fertilizer Industry Round Table’s 57th Annual Meeting.
The overall message was that it’s a good time to be a farmer or in the fertilizer business. Production and prices were expected to remain strong for all grains, and fertilizer use and prices were anticipated to continue increasing overall.
Although some of the speakers used different estimates for crop projections in terms of acres planted, yields, and prices, all were essentially positive. Consumption of fertilizers to make those estimates come true was expected to increase, and so will prices for most.
One of the longer term losers will be the sulfur producers, who will begin to produce a surplus sometime in late 2008 – and that situation will continue well into the future, according to Terry Draycott, Prism Sulphur Corp.
Sulfur production will climb steadily between 2009 and 2015, and as a result, prices will tumble. Currently, sulfur is in short supply worldwide and prices are at all-time highs, but as new sources of supply come online in the coming years, prices will fall. China, currently a major importer, will continue consuming more each year, but will begin producing more of its own through the projection period, up until 2015.
Currently, oil and sour gas production each account for about 49 percent of the supply of sulfur, but by 2015 oil will account for 41 percent and sour gas 50 percent, while oil sands projects, particularly in western Canada, will provide 8 percent.
Nitrogen production in the U. S. was expected to increase about 6 percent next year, while imports will decrease about 5 percent. However, nitrogen imports will have a 57 percent market share, a decrease of about 2 percent over the current year. Imports of urea, UAN, and ammonium nitrate were all expected to decrease slightly next year. Overall, nitrogen product consumption for fertilizers was expected to be down about 300,000 mt in 2008.
The price of ammonia at Tampa was projected to be around the $300/mt level next year.
The slight decrease in nitrogen consumption in the U. S. was expected to help ease the supply/demand situation worldwide, although Andrew Prince of British Sulphur Consultants did not offer a price projection.
Phosphate and potash will be the big winners in the foreseeable future, which shouldn’t come as a surprise, considering their record high prices. Supplies for both products were expected to remain tight during the next several years, which will support prices.
Mosaic’s Mike Rahm said supplies of phosphates will remain tight this year and next, and there were more positive signals than negative signs to support higher prices. The IFIA estimated global demand will be 5.2 percent higher in 2006/2007 for P205, and up another 3 percent, or another 1.2 million mt in 2007/2008, with consumption exceeding 40 million mt.
Brazil and India were key factors in that increased consumption. Brazil’s emergence from a drought, and the subsidies India pays to keep phosphate prices low for its farmers, who pay only $230/mt, were given as reasons.
In addition, domestic consumption will be up 9 percent for the 2006/2007 period. In 2007/2008, corn acreage in the U. S. will drop from about 93.5 million acres to around 88 million acres, while acreage for soy beans and wheat, which consume more phosphate, will offset that loss.
In 2007, phosphate sales increased 12 percent in the world, excluding China. Latin American sales were up 28 percent, with Brazil leading the way with a 58 percent increase.
In Western Europe, where about 700,000 acres were being removed from set-aside programs, imports were expected to increase 10 percent in 2008. Australia, which was also coming out of a drought, was up 35 percent in 2007 from 2006, and was expected to increase another 28 percent in 2008.
Phosphate exports from the U. S. were expected to decline to about 6 million mt in 2008, but Morocco will be increasing its output that year. Saudi Arabia will have phosphate processing plants coming online in 2009 and 2010.
China, which had been exporting phosphate much of this year, was expected to impose a stiff export tariff for phosphate in January, which will benefit other phosphate producing countries. Rock production in the former Soviet Union will be flat next year.
Potash prices rose dramatically during the past year, and will likely continue to rise in 2008. Nine new projects were in the works in North America. However, supply shocks have hurt potash production – flooding and other problems in Saskatchewan, New Brunswick, the Congo, and Russia took their toll. In addition, depletion of potash in France, eastern Germany, Michigan, and Spain also decreased capacity. Risks to potash supplies this year and next included the sinkhole affecting Russian supplies and a possible rail strike in Canada.
The weak U. S. dollar, which the industry uses for trading, was also causing potash prices to increase. Regardless, capacity will not keep up with demand, which was up in China, India, and Brazil, according to Ken Taylor of Intrepid Potash.
In the U. S., the factors driving higher prices for fertilizers were ethanol and bio-fuel growth, along with higher prices for corn, soy beans, and wheat. Those trends were projected to continue well into the future.