Fertilizer 2019: Slight Upticks in Demand Expected
At the moment, it appears the outlook for fertilizer during 2019 is slightly positive. Of course, how strong this recovery makes itself known will largely depend upon some regional performances during the year.
But before looking forward, it bears looking back at how the fertilizer marketplace performed during the 2018 growing season. Initially, back in the spring, it seemed as if market demand for crop nutrients would be extremely strong. In fact, in early May, John Oster, Sales Specialist of The Morral Companies, Morral, OH, sent the following email to CropLife® magazine regarding his company’s fertilizer situation:
“We have had 14 straight days of near-perfect field conditions,” Oster wrote. “Our retail people are running on fumes. Warehouses and terminals all around us, including all of the recent (within five years) big-box warehouses, are running very low on primary products. And many are running out.
“An example,” he continued. “We had a meeting here yesterday concerning a product that we thought would be long about 3,000 tons. This morning we just concluded a meeting on that precise product, and the numbers now say that we are probably going to run out. And when we contact the basic supplier, they don’t know when they can get some more cars moving.”
More impressively, this uptick in fertilizer demand during 2018 occurred as more U.S. growers shifted their acreage from crop nutrient-intensive corn to soybeans. In fact, according to USDA figures, there were equal amounts of corn and soybean acres planted last year, 89.1 million acres apiece.
During the fall months of 2018, however, most ag retailers reported very little fertilizer application work being done by their grower-customers. What slowed the market down? In a word, said Parry Dixon, retired Chief Economist for Archer Daniels Midland Co., tariffs.
“With the disruption in trade flows for agriculture starting over the summer, the agricultural market really stalled,” Dixon said while speaking at the The Fertilizer Institute (TFI) 2018 Outlook and Technology Conference in November. “Once this happened, the entire market began a waiting game for any moves on trade between the U.S. and China.”
Moving Back to Corn
Of course, while they might be willing to wait out fertilizer usage based upon the ongoing trade war between two of the world’s largest economies, grower-customers are hardly standing pat on their crop choices for 2019. In fact, according to USDA estimates, corn will once again be the top crop by acreage this spring, with an estimated 92 million acres being planted. On the other hand, soybeans (which is the major crop being negatively impacted by the Chinese tariff situation) will see its acreage fall back to an estimated 82.5 million acres. Among the other crops, wheat is projected to be up from 47.8 million acres in 2018 to an estimated 51 million acres this year. All other crops should remain relatively flat in acreage from 2018 to 2019.
Looking to benefit from this move back to corn from soybeans in the U.S. will be the nitrogen (N) segment of the fertilizer market. According to Alistair Wallace, Head of Fertilizer Research for Integer Research, the N segment could use some growth push, especially considering how it has performed in recent years.
“Demand for nitrogen fertilizer has halved over the past five years,” Wallace said. “Between 1996 and 2014, the annual growth rate for nitrogen fertilizers was 4%. Today it’s only at 1.5% — and this is expected to remain the case through 2023.”
Part of the reason for this slowdown in N demand, Wallace said, ties back to changes in the Asian economies. “For years the Asian economies such as China and India were the growth engines for nitrogen demand growth,” he said. “But there are new policies in place now that are limiting the use of urea, so the market has lost its growth engines.”
Looking forward, Wallace predicts that the urea market will be at a deficit for the next two to three years, at least until India and Nigeria complete their capacity build-outs. However, he pointed out that “governments are directly and indirectly subsidizing the urea market and could tip the market back to a significant surplus.”
P, K Demand
As for phosphorus (P) demand, the outlook for 2019 is a bit stronger. “The pace of demand growth has picked up,” said Dr. Michael Rahm, Vice President, Market and Strategic Analysis for The Mosaic Co. “There is still a heavy drag from China and a slow recovery in India, but there are extraordinary and broad-based gains in the rest of the world.”
Despite this, the market still experienced three 1 million-ton-plus supply adjustments during 2018. This included the temporary idling of Mosaic’s Plant City, FL, facility, slower-than-expected ramp up of projects in Morocco and Saudi Arabia, and lower Chinese exports due to new environmental taxes and regulations.
Still, overall in 2018, Rahm said, global shipments of the leading finished phosphate products increased 2.4% (1.7 million tons) to 69.4 million tons. “In 2019 this total is projected to increase 0.6% to 69.9 million tons,” he said. “We project shipments outside of China will increase 2.8% or 1.5 million tons this year.”
As for the potash (K) segment, demand in 2018 did slow down some from the big 8.5% annual gain made between 2016 and 2017. For the year, K demand increased from 66.6 million tons to 66.8 million tons. According to Humphrey Knight, Potash Analyst for CRU International Ltd., part of the reason for these gains ties back to increased demand in China and other countries located in Southeast Asia.
“In fact, these market conditions are expected to continue driving the potash market forward for years to come despite flat consumption in the U.S.,” Knight said. “By 2023 potash deliveries are expected to top 76.8 million tons.”