Urea supply continued to exceed demand over the past two months and international prices fell to around the low levels recorded in 1993 and 1989. The excess supply situation is expected to continue as high urea prices in the past few years stimulated the investment in 4 million tons per year new production capacity in the Middle East and the Caribbean which is expected to become operational in the near future. In addition, China has announced that it intends to accelerate its domestic manufacturing capacity. With further scattering of manufacturing capacity, the international urea (and ammonia) market might become more volatile when compared to other nutrient markets. The need to meet at the same time the import requirements of China and India has not occurred. It is at present uncertain when China will reappear in the international market. India temporarily deferred its public sector imports as domestic production increased and urea demand lagged when compared to demand for DAP. By contrast, Bangladesh has scheduled its imports for immediate delivery to compensate for lost domestic production during the last 8 months and in Pakistan arrangements are being made to import for the upcoming winter planting in November. Prices from Indonesia are under downward pressure with ample export allocations in the absence of firm demand from Vietnam and reported high domestic stock levels.

Relatively strong prices for ammonia in Asia reflect the tighter supplies of traditional suppliers in the Middle East. In Europe prices may weaken further in anticipation of continued increase in supplies from Russia where gas prices have been fixed at a level that would permit profitable exports.

AVERAGE FERTILIZER SPOT PRICES (bulk, f.o.b.)

	1997		1996	Change from
	July	August	August	last year 1/
	( . . . . . . . . . . . . . . . . U.S.$/ton . . . . . . . . . . . . . . . . . )			( . percentage . )
Urea
eastern Europe	109-112	105-107	184-189	- 43.2
Middle East	132-139	127-135	197-201	- 34.2
Ammonium Sulphate
eastern Europe	59-61	48-51	70-72	- 30.3
U.S. Gulf	85-90	85-90	65-70	+ 29.6
western Europe	80-82	80-82	69-75	+ 12.3
Diammonium Phosphate
Jordan	214-219	214-219	226-235	- 6.1
North Africa	207-213	204-213	225-232	- 8.8
U.S. Gulf	197-201	193-194	209-213	- 8.3
Triple Superphosphate
North Africa	161-165	161-165	175-180	- 8.2
U.S. Gulf	163-167	161-164	177-180	- 9.0
Muriate of Potash
eastern Europe	82-95	82-95	75-93	+ 5.4
Vancouver	114-125	114-127	117-125	- 0.5
western Europe	112-117	112-117	106-116	+ 3.2

SOURCE: Compiled from Fertilizer Week and Fertilizer Market Bulletin.
1/ From mid-point of given ranges.

Prices for phosphate fertilizer remained stable over the past two months. In anticipation of the fall season planting, demand for DAP in the United States market is stronger than a year ago while exports to India continued. DAP imports into China in early 1997 increased considerably. Demand from Argentina and Brazil has also been strong and it is expected to increase further. Phosphate fertilizer production in the CIS increased during the first half of 1997. Off-take prices in Belarus have been lowered to stimulate domestic demand. In Russia credit availability for inputs has improved, but the impact on fertilizer consumption is not yet known. In the Ukraine, phosphate fertilizer prices could be sustained by exports to Brazil. The government of India increased the budget allocation for phosphate fertilizer subsidies in support to promotion of balanced fertilizer use and a positive effect on demand is envisaged. DAP exports from Jordan increased substantially to India, Ethiopia and Iran. North African DAP and TSP exports to Europe are expected to increase to meet seasonal requirements for winter planting.

International potash prices have shown little change in July and August and future developments will be influenced by demand in the important markets in Asia and Latin America. Although imports in China have been substantially higher this year than in 1996, re-exports also increased especially to Indonesia. In the United States prices increased slightly in response to temporary lower supplies from Canada. In Russia and Belarus production increased and exports rose even more, fuelled by sales to China and India. Technical difficulties in Jordan, which affected production capacity, have been overcome.