Thursday, November 30, 2023

Better fert prices on the way: Rabobank

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Most fertiliser prices gradually returning to their historical averages.
Rabobank analyst Vítor Caçula Pistóia says further price cuts for fertilisers are expected over the remainder of 2023 – especially for phosphate fertilisers.
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Global fertiliser affordability is improving with a rapid recovery in consumption possible in some regions in 2023.

But demand will take a while to return to pre-pandemic levels, according to a new report by Rabobank.

Supply constraints resulting from the covid-19 pandemic meant global fertiliser prices started to trend higher in the first half of 2021, the bank’s semi-annual Fertiliser Outlook report said.

“Affordability deteriorated further when fertiliser prices set new record-high levels after Russia invaded Ukraine. By that time, reasonable commodities prices were the only reason unaffordability didn’t surpass the record set in 2009 during the global economic crisis.

“Most fertiliser prices are gradually returning to their historical averages, and in some cases, like urea, current values are below historical levels already.

“On the commodities side, values remain above average in some cases, due to tighter stocks. The combination of these two factors is helping affordability. However, global consumption may take two or three years to recover, and the speed of recovery will depend on how long the current positive cycle lasts.”

In the New Zealand market, report co-author Vítor Caçula Pistóia said further price cuts for fertilisers are expected over the remainder of 2023 – especially for phosphate fertilisers.

“Due to intrinsic characteristics, fertiliser price movements in New Zealand tend to lag behind those in international markets, and we anticipate the price falls we’ve seen in other regions will flow through to New Zealand prices over coming months.

“The last three years have seen growing price curves for fertilisers and now it is likely that prices in the remainder of 2023 and early 2024 will reduce if no other ‘Black Swan’ events take place.”

Pistóia said this shift in price trend will be crucial to offset the lower NZ agri commodity prices seen across recent months and to sustain margins on the positive side.

The report’s fertiliser affordability index indicates that prices are trending back to becoming cheaper over the next 12 months.

“The recent improvement in the affordability index will allow some regions to slowly increase consumption turning 2023 into a year or transition from the significant drop observed in 2022. 

“Global consumption may take two to three years to return to the levels observed in 2021. The speed of the recovery will depend on how long the positive cycle of the affordability index lasts,” it says.

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