- DTN Headline News
Global Fertilizer Outlook - 3
Tuesday, December 16, 2014 3:01PM CST

By Russ Quinn
DTN Staff Reporter

SAVANNAH, Ga. (DTN) -- While the world demand for phosphorus fertilizers continues to climb with a growing world population, U.S. farmers may decide to curtail phosphorus applications in the 2015 growing season because of profitability concerns.

If U.S. farmers do decide to apply the nutrient next spring, there is some question if the logistical system can handle that much demand in one application season.

Wayne Welter, market analyst for J.R. Simplot, said in a phosphorus outlook presentation at the 2014 Fertilizer Outlook and Technology Conference held last month in Savannah that a couple different factors will be in play in 2015 for phosphorus. End-user demand and Chinese exports are going to be important areas to watch in the upcoming year.

LESS P APPLIED?

U.S. farmers have seen grain prices drop to the lowest levels in four years. Growers are watching grain prices and retail fertilizer prices closely and are contemplating fertilizer affordability, he said.

"Will growers cut application rates in response to lower grain prices?" Welter asked. "This is the conversation going on right now with growers."

Welter explained the ratio of DAP NOLA (wholesale price of Diammonium Phosphate at the Port of New Orleans) to the future December corn price gives a feel of how affordable the DAP fertilizer would be. The average ratio since 2009 is 37% higher than the historical average. This suggests affordability issues, he said.

The U.S. phosphate demand should stay flat to down in the short-term, generally where it has been in recent years, Welter said. American farmers used 4.2 million tons in 2010, 4.3 mt in 2011 and 4.4 mt in 2012. The forecast for 2013 is expected to be 4.2 mt; 2014, 4.4 mt; and 2015, 4.2 mt.

With a late harvest in some locations and many farmers deciding to limit phosphorus application this fall because of perceived high retail prices, Welter questioned whether logistical constraints will act as a barrier to prevent all demand from being met if farmers do decide to apply phosphorus in spring. It is not realistic to think all phosphorus applications can be made in one spring season, he said.

"This is going to be a huge issue to watch," he said. "This is a lot of pressure on an already fragile logistic system."

U.S. farmers are not the only producers in the world to consider cutting back on applications of phosphorus.

BRAZIL ALSO CONSIDERS CUTS

Brazilian farmers will also generate lower revenue per acre, which will affect nutrient demand there, Welter said.

With little fertilizer production in Brazil, most of its nutrients are imported. In recent years, the tons of fertilizer Brazilian farmers are using were increasing, but this may change in 2015.

In 2011, Brazil imported 3.7 million metric tons (mmt) of phosphorus fertilizers while for 2012 it was 4 mmt, and in 2013 the number jumped to 4.7 mmt. Brazil is forecast to import 5.4 mmt in 2014, but pull back imports to 5.2 mmt in 2015, he said.

Welter said phosphate inventories in the Brazilian countryside are growing as a result of profitability concerns. For the same reason about profit concerns, growers in Mato Grosso may forego planting their second-season crop.

CHINESE EXPORTS INCREASE

While U.S. and Brazilian farmers may cut back their phosphorus applications in the upcoming growing season, other countries are going to ramp up their usage or production of the nutrient.

China's importance in the world phosphorus outlook is growing. The country looks to its phosphorus exports in the coming years. China is forecast to export 5.9 mmt in 2014 and 6.3 mmt in 2015. This comes after exporting 4.9 mmt in 2011 and 4.5 mmt in both 2012 and 2013. The nation is also expected to export roughly 1.5 mmt of phosphorus fertilizer to the Western Hemisphere in 2014, Welter said.

However, Rongjian Sun, a fertilizer distributor in Beijing, told DTN's China Correspondent Lin Tan recently that China is expected to export 3 mmt of phosphate fertilizers in 2015.

China liberalizing its agricultural sector is the main reason phosphorus exports are expected to increase. Revisions to the 2015 export tax regime will enable China to export year-around, and this has a cumulative impact on their exports, Sun said.

INDIA DEMAND INCREASING

India is another country important in the phosphorus outlook. Indian demand for phosphorus is set to increase in the coming years. The new Indian government has stated it will make the necessary revisions to increase phosphorus application, he said.

India is forecast to consume 7.5 mmt of DAP in 2014, which was up from the 7.2 mmt used in 2013. In 2015, the country is expected to use 8.2 mmt of the nutrient, he said.

In the medium term with world demand increasing for phosphorus nutrients, there is room for capacity expansion in the global phosphorus market, Welter said. With various new projects in the works across the world, he estimated an additional 5 mmt of new product could come online in the next few years.

"The industry can justify capacity expansion because of the increasing world population," Welter said.

AFRICA OFFERS OPPORTUNITY

The continent expected to see the most disproportionate population growth is Africa. The continent already has 15% of the world population today and this could jump to 25% by 2050.

This growing population creates a huge opportunity in Africa, where many regions use little fertilizer. Using more fertilizer will help ensure food security, he explained.

There is a clear relationship between the population rates and nutrient use, Welter said.

Global agricultural phosphorus demand in the medium term will trend higher with the increasing world population, and developing nations will account for much of this growth, Welter said. The world demand is forecast to grow at a rate of 2.0% in the coming years, from a forecast of 42.0 mmt in 2015 to 44.6 mmt in 2018 and 47.3 mmt in 2021.

Russ Quinn can be reached at russ.quinn@dtn.com

(ES/AG)


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