The rising prices of wheat, maize and soy have little impact on the demand for fertilizers. The demand for fertilizers also remains stable in the EU. Rabobank reports this in an analysis of the fertilizer market.
Arable farmers have sown slightly more grain, but the final crop plan has not yet been determined on many farms. No major changes are expected in this regard. Some Member States are introducing stricter use standards for manure, but this has little impact on demand.
CO2 reduction
The price of KAS is relatively low and is expected to remain stable in the coming months. The price level of urea is at the 5-year average. The social unrest in Belarus has not yet had any consequences for the price of potassium-60. The country, the second largest potash producer in the world, is managing to maintain production. Import duties that the United States has introduced on phosphate fertilizers mainly affect its own growers. There is no question of a decline on the world market.
The phase 1 emission allowances (EU ETS) will be rolled out on January 2021, 4. The number of emission allowances is reduced by 2,2% per year. Large amounts of CO2 are released during the production of ammonia and nitrate. It is not yet clear how the system will work out for the fertilizer industry, but it could increase prices in the longer term.
Global market
The International Fertilizer Association (IFA) predicts a global growth of 4,5% in urea production capacity for 2021. This growth is much higher than the annual increase in demand of 1% per year over the past 5 years. Half of the production expansion comes from India. The Indian government has postponed subsidy payments and imposed production limits to avoid flooding the market. The only question is whether this is enough.
The low exchange rate of the Brazilian real compared to the US dollar makes imported fertilizer relatively expensive. This partly offsets the effect of the higher prices for corn and soy. However, there remains a stable slight growth in demand.