Fertilizer Prices Rocket Higher As Farmers Become 'Bullish' On Upcoming Growing Season 

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by Tyler Durden
Thursday, Mar 11, 2021 - 09:10 PM

US wholesale fertilizer prices have been on a tear since December 2020 due to rising commodity prices, tight supplies, and strong demand. 

Last fall, Rabobank forecasted that phosphate and other fertilizer prices would remain elevated in the first half of 2021 because commodity prices were accelerating. Now Rabobank reports phosphate prices have nearly doubled.

"With the increase in commodity prices, there has been an increased demand for fertilizers since last fall. This increased demand, coupled with reduced fertilizer imports is – according to forecasters – predicted to keep fertilizer prices elevated through fall and potentially into next year," Jamie Patton, senior Outreach Specialist for the UW-Nutrient and Pest Management Program, told Wisconsin State Farmer

DAP Tampa Fertilizer Index has nearly doubled since the start of the year. 

Patton said the recent cold weather bogged down truck, rail, and barge transportation networks across the Midwest. This led to challenges for transportation networks to haul fertilizer from ports to Midwest areas. She said supplies were "already low or depleted" ahead of the winter season. 

Demand for fertilizer began to ramp higher in late 2020 as farmers became optimistic about the 2021 growing season with futures prices of agri commodities rising. 

"Many farmers capitalized on lower fertilizer prices back then and prepaid for a majority of their fertilizer needs for this growing season," Patton said. "Additionally, with warm, dry weather during harvest, some farms capitalized on early harvest and good field conditions to apply nutrients."

Other industry experts, such as Citi's commodity desk, have also expressed optimism in the agri space. 

Citi surveyed more than 100 farmers across the Midwest to assess fertilizer and crop chemical inventories and price expectations for fertilizers and seeds ahead of the growing season. They found farmers were overly "optimistic on the Ag cycle." 

Here's part of the bank's report:

We surveyed 100+ farm dealers across the Midwest to gauge fertilizer and crop chemical inventories, and price expectations for fertilizers and seeds. We also surveyed participants on CTVA's Enlist E3 soybean system and optimism on an Ag rebound. Overall, respondents were very optimistic on the Ag cycle, which we had expected given higher commodity prices. Corn prices are trading at ~$5.45/bu compared to ~$3 in August 2020, while soybean prices have increased ~$5 to over $14/bu during the same period. For fertilizers, survey participants were most bullish on nitrogen & phosphate prices, followed by potash. 

Fertilizer Pricing Indicated Up

Survey participants were most positive on N prices, with 92% expecting higher prices followed closely by 90% for P and 77% for K (Figures 2-4). Given the higher projection for planted NAM acres this year, it is not surprising to us that most dealers would expect prices to move higher.

Fertilizer Inventories

The majority of respondents reported normal fertilizer inventories (Figures 6-8), which took us by surprise. We are hearing that inventories are extremely lean. Our guest speaker Toby Hvlinka from American Plant Food on our March Madness call series mentioned that he could not find any phosphates and the US still has to import more urea In our survey 19% and 22% of respondents said inventories were low for nitrogen and phosphates, respectively, while only 16% said inventories are low on potash.

This all means that rising agri commodity prices and input prices such as energy products, fertilizer, seeds, labor, and even equipment will continue to have an upward effect on food prices

Taking a look at the Bloomberg Commodity Index (BCOM), a basket of commodities, 2020 appears to have hammered out a low. Some 'experts' have said a "commodity supercycle" nears. 

... and to capitalize on all of this, Citi points out:

"We remain positive on all Ag names, and our rank order is MOS, NTR, CF, CTVA, and FMC."