At this moment, fertilizer markets are waiting for the fall season in the Midwest to get going in earnest. Early signs are encouraging as harvest here in Illinois is progressing rapidly. Buying activity for dry fertilizers has ramped up fast in the past few days. By the time you read this, some suppliers may be seeing spot outages. We'll see.
If the weather allows fall ammonia demand to "jump out of the gate" like dry fertilizer has, NH3 demand could surprise us to the upside. At least at the start, supply looks good.
In each of the last two years, fall demand was shut down early by weather. In addition, the "down in the mouth" syndrome dominating agriculture in recent months markedly limited preseason contracting of fertilizers for fall. Both factors have everybody in the supply chain pretty cautious about being long at season's end. The amount of supply positioned for fall may be a little light compared to what we consider "normal."
As we look beyond fall, the big question is new production, and specifically whether new production-capacity will make deferring applications till spring your best economic decision for the 2016 crop? Will fertilizer prices fall more from here? By planting time?
It's possible, but hard to say how probable. NH3 could decrease, maybe $20 to $30/ton, I'm guessing by spring…maybe, if production startups occur as they're supposed to (no word on that). For the other products, they seem to have "priced-in" the expectation for new production already. That is what efficient markets do. Waiting seems to have limited value on a per-acre basis, but you'll have to decide that.
Of course, if start-ups don't happen as scheduled, it is also possible that prices could rise for spring. Even NH3 could be higher in spring, if fall application is so light that markets are forced to price the "everything is going to have to be applied in spring season" scenario.
Beyond all this, producer-consolidation is becoming a market factor. That, and corresponding producer production-curtailments, are supporting phosphate prices globally, which may continue.
Looking at nitrogen, CF Industries is in the process of buying OCI, the Netherlands-based producer building a plant in Wever, Iowa. Like other consolidations, this could keep prices higher than they would otherwise be, due to lessened competition over the long term. By how much? Impossible to say, part of that depends on what or whether other consolidations take place as we go.
Dillier is GROWMARK’s director of Crop Nutrients. His email address is email@example.com.