21st Jan 2013, by Agrimoney
Macquarie and Rabobank sparred over potash price prospects, and held some disagreement over the outlook for urea, but concurred that phosphate values are to decline in 2013, weighed by sizeable supplies.
While Macquarie forecast potash prices "floating up through the year", supported by a quest by US farmers to "take advantage of strong commodity prices to replenish potassium soil levels that have been mined for years", Rabobank unveiled a "somewhat bearish" outlook.
China's agreement this month to buy potash from North American and former Soviet Union producers – the main exporters – at $400 a tonnes, a drop of $70 a tonne on deals last year, "points to ongoing pressure on prices and growing leverage of importers in contract negotiations", Rabobank said.
Indeed, expectations that a deal with China, the top potash importer, would clear the air for further contracts, notably from second-ranked India, may prove unfulfilled, given that India, with 1m tonnes in stock, may have until June before requiring supplies.
"A key factor to monitor for Indian importers is the volume and timing of potash demand in the US,
"In the scenario of slack spring application demand from the US, India may be able to negotiate an even lower price than $400 a tonne as the pressure on suppliers intensifies."
'Could surprise negatively'
However, on urea, it was Macquarie which more pessimistic – largely thanks to a smaller estimate of US sowings of corn, a nitrogen hungry crop, this spring.
Rabobank, forecasting corn acreage of 39.5m hectares (97.6m acres), said that such plantings implying that "farmers and other supply chain participants would need to engage in timely buying of urea, instead of waiting for the last minute".
Meanwhile, Indian demand, up 16% year on year in November, will continue to rise in early 2013 after a delayed monsoon delayed sowings of rabi crops.
However, Macquarie cautioned that US buying "could surprise negatively", given the potential for unused nitrogen to be left in the soil after drought restricted growth last year.
"Add to that a shift to soybeans from corn," for which Macquarie pegged plantings at 95.5m acres - a decline which would be "not good for nitrogen volumes" –and the bank forecast only a small spring rise in prices "followed by more supply weighting on prices through the balance of 2013".
'Bearishness continues'
However, both banks agreed on the prospect of phosphate price declines, with Macquarie flagging a continuation of disappointment late last year in US demand for the nutrient.
"Entering 2013, the bearishness continues with the market now fully believing that the global supply/demand balance will have to tighten in order to reinflate prices," Macquarie said.
While North and South American markets will provide some price support in the first half of 2013, this will "weaken once again the back half".
Rabobank said that it expected phosphate prices "to remain subdued", undermined by relatively strong applications last year, which means "there is less need for consecutive seasons of higher-than-normal application".
Macquarie and Rabobank sparred over potash price prospects, and held some disagreement over the outlook for urea, but concurred that phosphate values are to decline in 2013, weighed by sizeable supplies.
While Macquarie forecast potash prices "floating up through the year", supported by a quest by US farmers to "take advantage of strong commodity prices to replenish potassium soil levels that have been mined for years", Rabobank unveiled a "somewhat bearish" outlook.
China's agreement this month to buy potash from North American and former Soviet Union producers – the main exporters – at $400 a tonnes, a drop of $70 a tonne on deals last year, "points to ongoing pressure on prices and growing leverage of importers in contract negotiations", Rabobank said.
Indeed, expectations that a deal with China, the top potash importer, would clear the air for further contracts, notably from second-ranked India, may prove unfulfilled, given that India, with 1m tonnes in stock, may have until June before requiring supplies.
"A key factor to monitor for Indian importers is the volume and timing of potash demand in the US,
"In the scenario of slack spring application demand from the US, India may be able to negotiate an even lower price than $400 a tonne as the pressure on suppliers intensifies."
'Could surprise negatively'
However, on urea, it was Macquarie which more pessimistic – largely thanks to a smaller estimate of US sowings of corn, a nitrogen hungry crop, this spring.
Rabobank, forecasting corn acreage of 39.5m hectares (97.6m acres), said that such plantings implying that "farmers and other supply chain participants would need to engage in timely buying of urea, instead of waiting for the last minute".
Meanwhile, Indian demand, up 16% year on year in November, will continue to rise in early 2013 after a delayed monsoon delayed sowings of rabi crops.
However, Macquarie cautioned that US buying "could surprise negatively", given the potential for unused nitrogen to be left in the soil after drought restricted growth last year.
"Add to that a shift to soybeans from corn," for which Macquarie pegged plantings at 95.5m acres - a decline which would be "not good for nitrogen volumes" –and the bank forecast only a small spring rise in prices "followed by more supply weighting on prices through the balance of 2013".
'Bearishness continues'
However, both banks agreed on the prospect of phosphate price declines, with Macquarie flagging a continuation of disappointment late last year in US demand for the nutrient.
"Entering 2013, the bearishness continues with the market now fully believing that the global supply/demand balance will have to tighten in order to reinflate prices," Macquarie said.
While North and South American markets will provide some price support in the first half of 2013, this will "weaken once again the back half".
Rabobank said that it expected phosphate prices "to remain subdued", undermined by relatively strong applications last year, which means "there is less need for consecutive seasons of higher-than-normal application".
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