The fertilizer season for the current growing year is almost over. This is usually a period when prices fall. However, this year is not going by the book.
Rising wheat prices during harvest are highly unusual and now a similar phenomenon appears to be occurring in the fertilizer market. Normally the price drops during this period. Demand from agriculture is decreasing and suppliers are cautiously starting the first early pre-sale promotions. Now there is no question of falling, but rising prices. Although fertilizer prices are not rising as fast as last winter and spring, it is noticeable.
Expensive natural gas
For nitrogen-containing fertilizers, this increasing trend can largely be related to rising natural gas prices. The demand for gas is lower in the summer, which normally causes prices to drop. The summer period is also used by gas companies to replenish stocks. This summer we will not see falling, but rising gas prices. This is partly due to rising oil prices, to which the gas price is partly related.
The cold winter in Asia is also having an impact on the international gas market. Several countries such as Japan and China were then faced with acute shortages. To prevent a recurrence, they are now building up larger stocks of mainly LNG from Russia, for example. This competition makes it more difficult for European countries to build up stock. The Dutch gas supply can also be described as 'moderate'.
According to insiders, the price of KAS 27 has risen further in recent weeks, partly as a result. The price for KAS now amounts to €27,90 per 100 kilos, €0,80 more expensive than 5 weeks ago.
High demand and small stock
The potash market is affected by increased international demand and political unrest in Belarus. Sanctions against Lukashenko's regime partly restrict the export of potash. Potassium mines and fertilizer manufacturers often work with contracts of one year or longer and existing contracts may still be served in most cases. Belarus is one of the most important suppliers of this fertilizer to Europe. If the sanctions remain in force for a long time, this will shift more to the potash mines in Russia and Canada.
Kali60 has become €0,80 more expensive in recent weeks and now amounts to €29 per 100 kilos. From an international perspective, this price increase is not too bad. In Brazil, according to some sources, the spot price for potash has more than doubled in just a few months.
There is also a large international demand for phosphate-containing fertilizers. Supplies are therefore declining according to various sources. The price has gradually increased over the past 7 weeks by a total of €2 to €48,70 per 100 kilos.
Further increase is not unlikely
It is difficult to predict how fertilizer prices will develop in the near future. The normal seasonal patterns are broken in the second half of the year. Historically, the grain price is a good indicator of the direction the fertilizer market is taking. In the latest World Bank index, published at the beginning of August, grain prices started a cautious decline. While fertilizer becomes even more expensive.
A slight drop in fertilizer prices in the coming weeks may therefore be likely. But given the rebound in the wheat price in particular since the beginning of this month, a stabilization of fertilizer prices seems to be the highest achievable. A price increase is anything but unlikely.