Tight supplies and high prices of agricultural products including corn and wheat are expected to increase demand for fertilizers, through the near future, however, sometime past 2012, more plentiful supplies should halt potential shortages.
Last week Potash Corporation of Saskatchewan announced doubled quarterly earnings, however, the statement resulted in some negative sentiment regarding the fertilizer market reaching maximum output.
When applied to phosphorus, the Hubbert Peak Theory has created quite a stir in phosphate market, spawning a great deal of animated discussion and scientific analysis into the implications of peak phosphate.
Low inventories have granted potash and phosphate producers plenty of reasons to hike prices, and purchasers have been bearing these increases, fearing that if they don’t agree to contracts in a timely manner they may miss out on securing supplies.
Despite uncertainty over the stability of the global economic recovery, the fertilizer market is holding up very well, and will be buoyed over the coming years by supply shortages.
The recent earnings season was record-setting for many fertilizer producers, and despite a shaky global economy analysts expect that high-profits will continue into the foreseeable future.
Shrinking potash inventories are providing a clear signal that the market can bear another price increase. Potash inventories held by North American producers dropped by 183,000 tonnes in March, leaving inventories at 1.8 million tonnes, 26 percent below the five-year average.
Potash and phosphate producers have already been riding the wave of increased grain prices, and have been able to continuously boost prices charged for the crop nutrients. According to the USDA’s reports, this trend has no sign of stopping, at least in the near future.
The share prices of many potash and phosphate producers are battle-scarred this week, as instability in the Middle East and Africa has sent markets on a tailspin. One of the key markets impacted by the turmoil is the grain markets.
Three top fertilizer producers, with exposure to potash, phosphate and nitrogen, were upgraded over this past week.
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