The typical factors that impact fertilizer demand are compounded this year by supercharged commodity prices, driven in part by
"The key driver in this part of the world is biofuel and demand for corn that has increased with ethanol production," says Dave Coppess, Executive Vice President at Heartland co-op in East Central Iowa. "On a much broader scale it's the global demand for fertilizer that's creating a severe shortage, particular phosphates and potash."
Potash price inflation is here to stay at least through 2009, says JP Morgan. "We expect average annual potash selling prices to increase by $250 per metric ton to $417 per metric ton in 2008 and by $280 per metric ton in 2009," says analyst David Silver, noting domestic prices should rise $135 per short ton to $517 for June 1 shipments. "Delivered prices could reach $1,000 per metric ton by the end of 2008." Higher costs for non-integrated producers and sulfur supply shortages continue to drive diammonium phosphate prices and margins skyward.
"It all goes back to global demand in underdeveloped, now developing nations, generating more income per capita," says Coppess. "They like to improve their diets to higher protein which requires more grains to feed to livestock. The government in
When the Chinese government pushed export duties on urea and phosphates to 100%, it basically took them out of the export market. It removed a significant amount of product that had been in the international market place.
"So many things like that are happening and we don't know how long those things will last," says Tim Chrislip, a director at
"This puts us in a very volatile market where you can see huge swings in a very short period of time."