The fertilizer industry continues to adjust to the world and domestic decline in demand for N, P, & K products. The economic crisis continues to affect all countries ability to obtain credit resulting in issues related to the purchase inputs for this year’s crops. Grain prices have rebounded slightly from their lows but corn acres are still an unknown. The CN producers have announced major cut backs in production in an effort to balance supply with the decline in fertilizer demand. There have been in the past (and will be this time) an overreaction with too much adjusting of production resulting in an imbalance of supply that will take many months to sort through. There is a glut of softer spot priced fertilizer at some water terminals or larger inland warehouses feeding the lower price pressures while most Ag retailers are full of product purchased at higher costs.Imports of N products that were planned to arrive following what was expected to be a good fall movement, continue to arrive and back up on the water creating more costs in demurrage and storage. Not wanting to add to their losses, traders/brokers/US producers are dumping their CN positions and/or reducing production. The correction in supply and price will happen and it won’t have any order to it. Domestically or in other areas around the globe.One CN trader commented they will set out the rest of 2009 season….too unpredictable at this time and too costly to play. Many Ag retailers credit worthiness is being challenged by some suppliers knowing many retailers will take large losses as prices of inventory are adjusted. Strong balance sheets are imperative to survival.
Market commentary:
Potash: All North American producers have announced deep cuts in production. Anticipating China will still have to come in and negotiate with Potacan, There appears to be supply to meet current short term demand.
Price outlook: Expect some softening in the short term. Prices will firm the deeper we get into the start of Spring movement.
Phosphates: Prices continue to get down pressure due to the glut of barges on the water with no home. All domestic producers have now announced major curtailment in production.
Price outlook: Softer in the near term. Continued downward pressure on domestic prices until floating inventories disappear.
Poly Phosphates: Acid production is stopped until Feb. Expect tight acid supply.
Price outlook: Flat. Inventories remain tighter than other CN products.
Urea: Most global traders think that Urea price has hit its bottom at the Gulf and is poised to move up. Markets will be tested as wheat topdress begins..
Price outlook: Stronger from the Gulf lows that were reported in past few weeks. .
UAN: Imports backed up with full terminals making it difficult to move product in land.
Price outlook: Softer but difficult for cheaper supplies to move inland.
NH3: Dumping continues by the industrial users putting downward pressure on NH3 price. The challenge is separating what is real and what is rumor until you buy.
Price outlook: Softer. River terminals still dominating prices. Distribution issues will be created by lack of trucks available to make long haul turns in the spring.
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