• Our prior comments highlighted a view that normal spring demand could provide a floor to U.S. fertilizer prices notwithstanding relatively full supply chains during the winter. Our expectations proved too optimistic as evidenced by price declines of 6%for DAP and 11% for UREA since February 2015.
• A series of channel checks, including “on-field” interviews of producers, were conducted ahead of the 2015 planting season which commences on or about April 20th. What we learned suggests that pricing power should remain on the side of growers over the next six months thus placing incremental pressure on overall U.S. fertilizer prices.
• A few of the specific observations supporting this assertion are as follows:
- beyond delaying large capital purchases (such as new farm equipment) farmers are reducing their purchases of P (phosphorous) & K (potassium) to reduce costs in an environment of farmer margin pressure caused by low crop prices;
- related to this, certain growers are using less expensive anhydrous ammonia (riskier to handle) over liquid nitrogen fertilizer;
- cooperatives that purchase and resell fertilizer to their members are likely to reduce forward year purchases (which typically take place in July) given high storage levels of key nutrients.
North American AgriBusiness Review – Rabobank, April 2015