P&K Prices on the Move

• DAP is $23.23 below year-ago pricing -- lower $76.07/st this week at $828.00.
• MAP is $27.34 below the same time last year -- off $24.94/st this week at $870.41.
• Potash is $93.78 below year-ago -- lower $3.34/st this week at $720.83.

Phosphate prices fell sharply during the report week with USDA reporting a $76.07 per short ton decline in DAP and a $24.94 falloff in MAP prices. There has been a great deal of ‘push-pull’ in the phosphate market worldwide over the past few years. First with the

countervailing duty litigations against Russia and Morocco. Then, just as the phosphate dust was beginning to settle, Russia invaded Ukraine setting off another round of anxiety and uncertainty for wholesalers. With Russia being a major global supplier of phosphates, sanctions were once thought to have resulted in opportunities for North American producers. However, global stocks did not tighten as much as wholesalers anticipated leading to a supply overhang. As a result, when compared to nitrogen, phosphates are priced at a discount and falling.

Since phosphates were eager to rise a few years ago in response to the countervailing duty case - nobody wanted to be caught short-bought - P’s current underpriced condition comes after finished phosphates led fertilizers to the upside. It may be that phosphates are again a harbinger of things to come for the nitrogen segment, which would price anhydrous closer to $1,000 per short ton. We highlighted nitrogen’s counter-seasonal move this year and phosphate is acting similarly. According to our 3-year average, (see chart) DAP and MAP are due to firm at any time now, especially with both products being priced below year-ago.

We believe a mild supply overhang will keep a lid on an aggressive upward move for both DAP and MAP. Of the two, MAP is overpriced compared to DAP and therefore maintains some near-term downside potential. The other side of that coin is the argument that DAP has over-corrected to the downside, MAP may hold steady and DAP may firm to realign with MAP and the two march higher in concert. Given the 3-year average seasonal price pattern, we see significant upside risk between now and spring.

Potash is also under pressure from a supply overhang but the surplus is a bit more serious than that of phosphates. According to a Reuters article, “Fertilizer producer Mosaic Co said that it has temporarily curtailed potash production at its Colonsay, Saskatchewan, mine in Canada, citing slower-than-expected demand. Mosaic said in a statement that its inventories are adequate to meet demand in the short term. The company had restarted Colonsay in August 2021 after idling it for two years. Mosaic’s decision to curtail production is short-term and longer-term fundamentals look positive, said Chief Executive Joc O’Rourke.”

Potash prices are likely to stabilize below current levels and our outlook is for sideways to slightly higher prices between now and spring. Given that the supply side cushion is soft enough to curtail potash production in Saskatchewan, we believe upside risk will be limited for the time being.

As with phosphates, potash is currently priced at a sharp discount to NH3 but rather than correcting to reflect nitrogen prices, potash tends to be more independent than phosphates and will take its cues from North American production and supply fundamentals.

December 2023 corn closed at $5.90 on Thursday, February 9. That places expected new-crop revenue (eNCR) per acre based on Dec ’23 futures at $977.45.

When indexed to reflect anhydrous ammonia pricing by the ton on a 1:1 basis, DAP is currently priced 200.78 points below anhydrous. MAP is priced 148.19 points below anhydrous ammonia and Potash is priced 160.67 points below one ton of NH3. This analysis is the result of a formula that adjusts P&K prices that allows direct comparison between NH3 and P&K prices. The following values do not reflect actual P&K prices per short ton but, rather, the result of our calculations.