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7/17/2024 End of Day Fertilizer Market Update

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7/17/2024 End of Day Fertilizer Market Update

 
  • Josh Linville
  • Vice President - Fertilizer
  • StoneX Financial Inc. - FCM Division
  • [email protected]

Another Southwest Fertilizer Conference has come and gone.  Meetings have been had.  Dinners eaten.  Beers drank.....so many beers drank.  How do we say goodbye?

So long, farewell Auf Wiedersehen, goodbye (source) – @thesoundofgifs on  Tumblr

Honestly, not much of a story coming out of this thing.  Bulls/bears appear to be headed home following a stalemate.

Bulls

  • There are supply/production issues around the world stifling available product
  • Farmers will farm next year...and need fertilizer to do that
  • Grain prices will rally (maybe...hopefully)

Bears

  • Farmer economics suck and supplies are underestimating demand cuts
  • Buying patterns will be pushed significantly back
  • Long time between now and big demand

 

From this vantage point, here are my issues:

Urea

  • Chinese exports - they have exported very little so far this year.  It could be the smallest number of tons that they have ever exported.  They will be lucky to reach 1.5M tons...and that is 4M tons less than "normal"
  • Brazil production - production is offline with no real short term hope of restarting
  • European production - very slim (and fading fast) chance of offline production restarting
  • Egyptian production - should improve but will remain as a "worry" point going forward

UAN

  • European production - doubtful offline plants restart, giving U.S. manufacturers a relief valve
  • Trinidad production issues - hopefully more short term, but allows U.S. manufacturers even more of a relief valve
  • European tariffs again Russia? - if this happens and they go it alone, European farmers are in for a rude price awakening.  If other friendly nations follow, UAN gets nasty (upside) quick

NH3

  • Russian exports - they should start exporting, but not at the rate we hoped for in 2024
  • European production - again, U.S. export opportunity

Phosphate

  • Chinese exports - June/July is a rough patch.  Will this be it...or will the government do more?
  • U.S. tariffs - blocking 3 of the 5 largest countries from coming puts you in a bad way...especially for MAP
  • Demand cuts - farmers can likely cut phosphate much easier than other inputs.  How large will it be...and what will the timing look like

Potash

  • Chinese purchases - seems they are comfortable with getting production from their partner countries
  • Canada rail strikes - will this story ever go away?

 

Ultimately, seems like a market that is going to be relatively subdued in the short term.  Not much of a reason to really move significantly higher or lower.  However, farmers are not in a spending mood and retailers are not in a risk taking mood.  Likely pushes us into more of a just in time mode.  That means a lot of stress on logistics which pushes basis wider.

Still believe we should be looking for those narrow basis opportunities to secure.  You get the physical without the overall price risk.  If it plays out as expected, you can ride that basis to a healthy margin that you have grown accustomed to the last few years.

Trades today

  • Q4 '24 NOLA Urea Paper - $310
  • July NOLA Urea Physical - $302

image-20240717172010-1

Related tags: Fertilizers

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