2023 fertilizer outlook provided

After a year of extreme volatility in the fertilizer market, experts are optimistic about consumption improvement and price declines rolling into the new year. 

“When geopolitics meets fertilizer markets, things get bumpy for fertilizers. This is exactly what has happened over the past two years, with tensions peaking after the invasion of Ukraine. But, for 2023, expect things to settle somewhat,” says Bruno Fonseca, RaboBank senior analyst of farm input, in a recent RaboBank report. 

The report notes current price trends and volatility are in line with a three-year cycle of peaks. However, if history is to be believed, prices should come down in coming months. 

“The index’s moving average is trending lower, as fertilizer prices are returning to pre-war levels,” Fonseca says. “For the next three months, the index will continue to trend downward but remain above normal.”

Throughout the month of December, Progressive Farmer DTN Reporter Russ Quinn published a three-part series on the global fertilizer outlook for 2023. The series deep dives into price, supply and demand predictions of nitrogen, phosphorus and potash fertilizers for the coming year. 

Nitrogen prices

According to Quinn, the price and supply of nitrogen fertilizers will depend heavily on several issues facing the market, such as the war in Ukraine, rising natural gas prices, weather and currency concerns.

“Nitrogen prices are already at high levels and fertilizer analysts don’t believe prices will decline any time soon,” states Quinn.

IStoneX Director of Fertilizer Josh Linville says some forms of nitrogen fertilizer, such as urea, may have higher prices in the first quarter of the new year while other forms, such as urea ammonium nitrate and anhydrous ammonia, may see steady to higher prices as well. 

Samuel Taylor, input analyst for RaboBank Research, points out with so much volatility in the global nitrogen market, there is a very small chance prices will decline in 2023. 

Factors affecting
the nitrogen market

CRU International Limited Head of Fertilizer Chris Lawson explains natural gas prices are one of the larger factors affecting the nitrogen market, especially in Europe where production of nitrogen fertilizer was reduced because of high natural gas prices. 

Although natural gas prices have declined, Lawson notes the European winter has been colder than usual, which may cause natural gas supplies to decline and prices to rise again.

Senior Analyst for Terrain Matt Roberts points out the natural gas supply in Europe and North America will decline with every cold snap this winter, which may lead to more nitrogen availability issues. 

“U.S. weather issues, specifically the severe Midwestern drought, had a negative effect on Mississippi River levels. The shallower river led to barges having less grain going down the river and less fertilizer aboard going back up the river,” Roberts explains. “Usually, river levels rise in the spring with the rains and the melting snow cover in the northern Midwest. This situation might help next spring. But, the slowing of fertilizer moving north will only cause nitrogen fertilizer prices to rise.”

Additionally, the adjusting of interest rates by the Federal Reserve will affect how much it costs for North America to import various nitrogen fertilizers. Roberts says the weak U.S. dollar on the world market also means the price of fertilizer is going to be higher.

“Like many other factors facing the nitrogen market in the new year, the condition of the world economy will also affect prices,” he notes. “An economic downturn worldwide would be negative for the world nitrogen market. The amount of volatility is huge for the nitrogen market. No one can really predict what is going to happen.”

Phosphorus

In the second article of his three-part series, Quinn says there is both good and bad news for the 2023 phosphorus fertilizer outlook. 

The bad news, according to Quinn, is the phosphorus market will continue to face several challenges including effects from the war in Ukraine as well as some logistical concerns due to weather issues. 

Like the nitrogen market, he notes the overarching concern for phosphorus fertilizer is low Mississippi River levels, caused by drought conditions, which has required barges to carry lighter loads in order to navigate the shallow river. Subsequently, fertilizer may move up the river at a slower pace than usual, and this limited movement of supply could in turn cause prices to hike upwards. 

Because many producers decided not to use phosphorous fertilizer due to record-high prices, leftover supply could lead to lower prices throughout the coming year, which is the good news, notes Quinn.

Taylor believes the fertilizer market in Brazil may be a leading indicator of what the rest of the world will see as far as phosphorus fertilizer and prices go in 2023. 

“Brazil, which imports nearly all of its nutrient needs, currently has excessive inventories of phosphorus fertilizer. Prices for phosphorus fertilizer have dropped 20 to 30 percent because of the high inventories in the South American country,” he explains. “This fertilizer can be re-exported to places like Southeast Asia, but it shows there is no shortage of phosphorus fertilizer in the world.” 

“A wild card for the phosphorus outlook in 2023 is if, or when, China reenters the export market,” Quinn states, further noting China was one of the world’s largest exporters of phosphorus fertilizer at one time, supplying nearly 30 percent of total world trade. 

He explains many believed China would return to the market in mid-2022 after eliminating exports the year before to ensure there was an adequate supply for Chinese farmers when prices skyrocketed. However, this didn’t happen. 

“China recently introduced a quota system for the second half of 2022, hoping to keep domestic phosphorus prices lower,” says Lawson. “The big questions remains if China will ever reenter the global phosphorus market.” 

Potash 

When it comes to the global potash outlook for the new year, Quinn says it is still up in the air. Because Russia and the Republic of Belarus are the second and third largest producers of potash in the world, respectively, and because they account for 41 percent of global potash trade, Quinn notes the continued war between Russia and Ukraine may disrupt supply. 

“Because of record-high fertilizer prices, farmers across the world cut back on these nutrients, which cause demand to fall. With more supply on deck in 2023, potash prices should push lower in the new year,” Quinn writes. 

In fact, Taylor points out the U.S. may see a 25 to 30 percent decline in the price of potash fertilizer in the U.S. in 2023. 

Quinn explains fertilizer logistics during the early part of 2023 may affect potash price and supply. Like nitrogen and phosphorus fertilizers, the Mississippi River issue will also affect potash.  

“Another winter of dry conditions could make the situation even worse,” he says. “Any logistics issues limiting the movement of fertilizer could quickly cause large price hikes, especially if the river remains low next spring.” 

Hannah Bugas is the managing editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.