FAO/GIEWS - Food Outlook, November 1997

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FERTILIZERS

International spot prices of urea continued to decline over the past two months with prices in September almost 50 percent down from a year earlier. Urea export prices from the Black Sea area show a downward trend, reflecting ample stocks in the short term. However, production cutbacks are under implementation in this area which will eventually restrict its urea availability. Manufacturers in the Baltic region are diverting supplies to the domestic market and may also reduce urea production in the near future. Urea export prices to western European countries are at U.S.$ 102 per ton fob. The low cost urea producers in the countries of the former U.S.S.R. have increased exports in recent years because of reduced domestic demand and attractive international prices. However, currently lower international urea prices make exports less attractive and these producers will have to depend to a larger extent on the recovery of their domestic market to compensate for the decrease in exports. In China, adequate stocks and new urea manufacturing capacity are meeting present domestic demand and this country has not been in the international market since April. However, it is expected that China will eventually have to resort to imports as domestic demand continues to increase rapidly. The considerable expansion in urea manufacturing capacity expected in the Near East in the near future will change the dynamics of the world urea market. In Indonesia, urea availability for export will in the long term be determined by domestic demand and growth in production capacity. The current Indonesian urea export prices reflect the current tight stock position, partly due to technical production problems and reduced urea production in order to increase ammonia exports. Urea export prices might increase again when demand in traditional export markets in Vietnam and Bangladesh grows. In the United States, domestic market prices may show a slight increase prior to the closure of the river transportation system, but are expected to fall again quickly. Prices for ammonium sulphate have decreased in eastern Europe and also in the U.S. Gulf and the Far East while they remained at about the same level in western Europe. Currently, ammonium sulphate prices are high in western Europe and the U.S. Gulf compared to 12 months ago but lower in eastern Europe and the Far East.

Ammonium prices have been stable in recent months but low demand and ample supplies are expected to result in weakening prices. Weak urea prices will encourage producers to reduce urea production and enhance ammonium output. Currently there is ample product on offer and producers in the Middle East have reduced ammonium prices to meet competition from Asian suppliers. The countries of the former U.S.S.R. have scaled down ammonium production. New ammonium capacity will become operational over the next few years, with most of the output supplying the associated urea plants. The majority of new stand-alone ammonium capacity is under construction in North America. Output will be mostly used in the United States, where farmers apply ammonia in solution directly to crops.

Phosphate fertilizer prices on the international spot market have remained relatively stable, with latest quotations between 2 and 10 percent lower compared to last year. The DAP

export market in the United States has continued to soften but prices might not decline further, reflecting an active domestic market, while export demand from the U.S. Gulf is low. Ethiopia and Bangladesh are expected to import DAP from this origin, while China is reportedly exploring for imports in October and November. DAP import demand is rather thin and increased competition among United States, Mexican, CIS and North African suppliers may weaken prices in the short term. India is not likely to arrange major DAP imports until spring 1998. For TSP, imports from North Africa have met demand from the U.S. Gulf and the Near East.

International prices of potash have increased marginally compared to the previous year. Demand in the Asian market is at present rather depressed.

AVERAGE FERTILIZER SPOT PRICES (bulk, f.o.b.)
1997  1996  Change from
August  September  September  last year 1/
( . . . . . . . . . . . U.S.$/ton . . . . . . . . . . . )  ( percentage )
Urea 
eastern Europe  103-105  90-94  176-180  - 48.3
Near East  121-128  97-108  191-196  - 47.0
Ammonium Sulphate 
eastern Europe  45-49  33-44  71-73  - 46.5
U.S. Gulf  85-90  80-85  65-70  + 22.2
western Europe  80-82  80-82  69-75  + 12.5
Far East  95-97  93-93  106-108  - 13.1
Diammonium Phosphate 
Jordan  214-219  214-219  223-232  - 4.8
North Africa  202-213  201-215  229-234  - 10.2
U.S. Gulf  193-194  197-199  200-204  - 2.0
Triple Superphosphate 
North Africa  160-165  160-165  178-183  - 10.0
U.S. Gulf  161-164  161-164  178-182  - 9.7
Muriate of Potash 
eastern Europe  82-95  83-96  78-93  + 4.7
Vancouver  114-127  114-127  117-125  - 0.4
western Europe  112-117  112-117  108-116  + 2.2

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

Potash stocks in China are low and domestic prices are tending to rise, while China’s potash re-export market has suffered from the weakening of currencies in other countries in the region. By contrast, demand for potash in the Latin America market is becoming stronger and prices have increased somewhat recently. Bad weather and heavy domestic demand caused delay in the shipment of CIS potash for export. In the United States potash fertilizer supply is short due to technical production problems in Canada. Potash fertilizer prices in the United States may increase if planned arrival of imports from CIS and the U.S. Gulf lag behind schedule.

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