Phosphate prices may not drop this summer

Unusually tight inventories have driven up the price of the second most popular fertilizer used on the Prairies

Farmers who buy phosphate fertilizer in the summer or fall could be in for sticker shock.

Prices usually drop in the summer, but that is not happening this year because of changing market dynamics, according to a supplier of the product.

Brendon Sayers, Canadian sales manager for EuroChem North America, spoke to a customer recently who is refusing to purchase phosphate at prices higher than he paid this spring.

“Well, good luck with that because it is going to be even higher this fall,” was Sayers’ reply.

Unusually tight inventories have driven up the price of the second most popular fertilizer used on the Prairies.

Statistics Canada reports that 594,000 tonnes of phosphate were shipped in the Prairies between July 2017 and March 2018, which is up from 459,000 tonnes the same period a year ago.

Sayers said retail prices are in the range of $730 to $750 per tonne, up from $680 to $700 per tonne in the spring.

“It’s not the norm, is the problem. Nobody can understand how this could be the case,” he said.

Corrine Ricard, senior vice-president of commercial and supply chain with Mosaic, the world’s largest phosphate manufacturer, shed some light on the situation during the company’s recent webcast announcing its first quarter 2018 results.

“Global demand growth is very strong,” she said in a transcript of the webcast published on the company’s website.

It is expected to grow another 1.8 percent for the remainder of 2018 because of rising demand out of India, Brazil, Asia, Oceania and Africa.

There have also been supply-side adjustments. Mosaic temporarily shut down production at its high cost facility in Plant City, Florida, removing 1.5 million tonnes of annual production.

There have also been much slower increases in production than expected in Saudi Arabia and Morocco.

“And that, combined with these lower Chinese exports, are creating a pretty tight S&D,” said Ricard.

Michael Rahm, Mosaic’s vice-president of market and strategic analysis, said Chinese exports are down one million tonnes, creating a 1.5 million tonne supply gap in 2018.

“What we are predicting is that the supply and demand balance is such that you’re going to have to see somewhat elevated prices and margins maybe to crimp a little bit of the demand growth but also (to) stimulate a little bit more supply coming from established producers,” he said.

Sayers expects strong prices right through the end of October and perhaps right up until Christmas.

He said the situation is much the same for potash because inventories are tight and demand is strong out of the United States.

Sayers said phosphate application rates are rising because growers are realizing through soil tests that the macronutrient has been mined out of the soil.

He estimates that 90 to 95 percent of all the small crops in Western Canada are receiving some form of phosphate when the seed goes in the ground.

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