Fertilizer demand picking up by early next year, report shows
Do you have all of your fertilizer purchased for the near future? If not, now may not be a bad time to think about it.
The recently released results of a study from a global fertilizer industry organization show that even though a demand downturn has led to lower prices in the last few months, that demand is seen rebounding, sending prices back to levels that were familiar just a year ago. The International Fertilizer Industry Association (IFA) recently released its Fertilizer Outlook 2009-2013 in which the group suggests, after the sudden fall in demand during the 2008-09 fertilizer campaign, a rebound may be expected for the 2009-10 campaign.
The world fertilizer markets experienced a period of extreme volatility in 2008, IFA officials say, as the combination of a global economic downturn and a deepening credit crisis in most leading fertilizer-consuming countries dampened short-term prospects. Fertilizer sales and import demand collapsed through the fourth quarter of 2008. World fertilizer consumption is estimated down 5.1%, from 168.1 million tonnes (Mt) of nutrients in 2007-08 to 159.6 Mt in 2008-09.
IFA researchers say consumption of nitrogen fertilizers is seen contracting by 1.6%, while demand for phosphate fertilizers and potash would decline more sharply, by some 7% and 14%, respectively. Because of lack of confidence and limited access to credit, farmers, in a number of countries, either deferred their purchases of inputs, including fertilizers, or chose to reduce application rates. The beginning of 2009 was dim for the fertilizer industry with disappointing sales prospects and weak demand recovery during the year.
IFA's reports show market conditions could be improving steadily for 2009-10 because of the stable growth trends that have been experienced so far in the agricultural sector. The group expects agricultural commodity prices to remain attractive, encouraging farmers to increase crop production, though IFA estimates that the economic crisis can be translated in one to three years of lost growth in fertilizer demand.
But, a gradual rebound might be felt as early as in the next six months. IFA officials anticipate a 3.6% growth for 2009-10, representing 165.4 Mt of nutrients.
IFA also forecasts a potential fertilizer supply surplus for the years to come. Between 2000 and 2007, the world fertilizer industry increased its overall operating rates for the three main nutrients (nitrogen, phosphorus and potassium). By the end of 2007, the industry was running at close to its maximum effective capacity. This explains the very tight market conditions that prevailed during the first half of 2008.
If such high demand had continued through the second half of 2008, a shortage of potash, phosphate and urea supply might have occurred, according to IFA. However, following the financial and economic crisis, a number of companies decreased dramatically their operating rates by temporarily closing down facilities. In the short term, the depressed demand for fertilizer and, in the long run, new projects coming into production in several countries are the main factors supporting the potential surplus argument, in particular in the potash and phosphate sectors.