CNS Canada –– Prices for nitrogen and potash have weakened over the first half of 2015, but according to an industry analyst, the relationship between fertilizer prices and ag commodity prices is pretty much in line with the 10-year average.
“I think we’ve seen some stabilization in fertilizer markets of late, which is promising,” said Andy Jung, director of market and strategic analysis with the Mosaic Co. in Minneapolis.
The fertilizer market has stayed relatively calm, he said, despite recent crashes in financial markets and wild swings in the price of crude oil.
Read Also
Alberta crop conditions improve: report
Varied precipitation and warm temperatures were generally beneficial for crop development across Alberta during the week ended July 8, according to the latest provincial crop report released July 11.
At the same time, he said, devaluation in some currencies has put fertilizer import economics under strain and likely contributed to some downward pressure on fertilizer prices in the past couple of weeks.
If a given country is an exporter of ag commodities, “the local currency price of those commodities will increase, which offsets the higher prices for inputs like fertilizer.”
This means the price for fertilizer has been generally rising in Canada since last fall, when the loonie began its descent relative to the U.S. dollar.
However, Jung said, from a global (US$) basis, fertilizer prices are actually down from 2014.
“They’re down from a year ago, a rough average of 10 per cent,” said Jung, adding that while the Canadian farmer has been paying more for fertilizer than a year ago, technically, he was getting a better exchange rate for his grain.
“It’s an inverse relationship with a number of moving parts,” he said.
When it comes to affordability, fertilizers are still in line with their historical norms relative to prices for corn, soybeans and wheat. However, the affordability metrics for particular nutrients are somewhat different.
According to information from Jung, prices for nitrogen are relatively cheaper than average and potash prices are right in line with the historical ratio, while phosphate prices are generally less affordable relative to the historical average.
Supply issues in a number of different countries and areas are also impacting production in 2015.
Availability so far hasn’t been an issue, but that could change once harvest begins, said Jung.
“If farmers delay purchases for too long, there’s a big rush in season once the crop is off the field and you’ll get these localized shortages,” he said.
With most crops coming off the field earlier than usual, the chances of that don’t appear to be great. Producers, however, should keep their eye on the yields coming out of their land, said Jung.
“Whenever you have a decent year for yields, you know you had a pretty significant draw on nutrition in the soil, which must be replaced, or it will become a limiting factor.”
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
