FAO/GIEWS - Food Outlook No.1, February 1999

FERTILIZERS

Urea prices fell over the past two months. In eastern Europe, December prices were quoted at about 30 percent below those a year earlier, while in the Near East, prices were about 21 percent down. This downward trend is expected to continue, as demand for urea is normally limited at this time of the year. Currency devaluation during the last quarter of 1998 allowed CIS producers to divert output to the international market, where they are reportedly receiving prices of around US$60 per tonne, which might lower the floor price in the world market. The timing and volume of the demand in Latin America will effect prices and production in the Black Sea and the Baltics. Production in Mexico is temporarily halted and stocks in Venezuela are low. Indonesia may become a net importer. India is scheduled to import 200 000 tonnes for the first quarter of 1999 and further imports of 2.2 million tonnes are envisaged. Pakistan imported small quantities of urea; other import allocations for 1999 will depend on domestic production. Turkey has entered the market and expects the arrival of 50 000 tonnes by end-January. In the United States, domestic market prices may show a slight increase prior to the temporary closure of the river transportation system, where after prices are expected to fall again quickly.

Prices for ammonium sulphate remained relatively stable during late 1998. December prices in western Europe and the U.S. Gulf were 10 percent and 35 percent respectively less than a year ago, while prices in the Far East and eastern Europe were 10 percent and 24 percent respectively more than a year ago.

Ammonium prices have been declining in recent months and this trend is expected to continue in the near future because of generally low demand and ample supply. This is especially the case for the Black Sea producers where stocks are reportedly high (60 000 tonnes). Producers in the Near East have reduced ammonium prices to meet competition from Asian suppliers. Ammonium prices may increase when Indonesia starts to increase urea production again. DAP production in the United States decreased and therefore also the demand for ammonia.

Phosphate fertilizer prices on the international spot market declined somewhat, with latest quotations around 0.2 percent lower compared to last year. The DAP export market in the U.S. Gulf has apparently stabilized as China entered the market for about 2.5 million tonnes. India retroactively established subsidies for phosphate and potash fertilisers irrespective of origin. Import demand may now come earlier rather than at the beginning of the summer planting season. The availability of ample stocks in the CIS continues to put downward pressure on export prices. Ethiopia is expected to import DAP from North Africa. Europe will continue to be supplied from the Baltic Sea, while Romania’s entry into the market will add to the supply potential from the Mediterranean.

International prices of potash have increased marginally compared to the previous year in Canada and western Europe, and by 11 percent in eastern Europe. Demand in the Asian market is increasing, in particular from Sri Lanka, Nepal and Viet Nam. Viet Nam increased its import allocation by 70 000 tonnes. Potash stocks in China are low and China has agreed to a price increase for its imports from Canada. Potash production capacity in China, however, is expected to increase in the next few years. Indonesia is scheduled to import 120 000 tonnes from China and Canada. Demand for potash in Brazil remained quiet due to foreign exchange uncertainties. In the United States potash fertilizer demand is low due to low grain and oilseed prices with the prospect of a possible reduction in the area planted. In Europe, however, demand increased following improved weather conditions for planting.

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

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