Global fertiliser demand will see little growth in 2024, while affordability is expected to decline, according to Rabobank.
A new RaboResearch report has shown that international fertiliser demand has not sustained the pace of recovery observed during 2023 and demand for key fertilisers remains “sluggish”.
The bank’s fertiliser affordability index, which is currently neutral, is expected to turn negative later in the year due to ongoing pressures on farmers’ operating margins.
Rabobank
As the crop season in the southern hemisphere approaches, Rabobank said that the situation for some fertilisers remains challenging.
Prices for phosphate fertilisers are higher than previous years and when compared to other fertilisers like potash.
“With these fertiliser prices, plus the pressure on farmers’ operating margins due to low agri commodity prices, we do not expect fertiliser demand growth to return to 2023 levels over the next six months,” Bruno Fonseca, senior analyst farm inputs at RaboResearch, said.
“Projections of strong global crop yields continue to pressure commodity markets, leading to lower prices and decreased operating margins for farmers.
“At the same time, prices of nitrogen (N) and phosphate remain above historical averages.
“Our affordability index suggests fertiliser affordability will move into negative territory within the next eight months,” he added.
Fertiliser
The report shows that phosphate affordability has “significantly worsened in recent months”.
The nitrogen and potash affordability indexes have shown stability, while urea prices experienced fluctuations due to supply issues at the end of June.
The potash affordability index saw a slight improvement through July, as the reduction in fertiliser prices offset the negative impact of commodity price deterioration.
Rabobank noted that agricultural commodity prices have persistently trended downward this year, primarily driven by record or near-record corn and soybean crops in the US and Brazil, leading to massive global stocks.
Other factors include economic uncertainties, higher freight costs, geopolitical tensions, the reemergence of La Nina, protectionism, and a challenging export environment.
“The implications of lower agri commodity prices are extensive. They are squeezing producer margins and impacting suppliers. Lower margins, in turn, impact the affordability of fertilisers, dampening demand,” Fonseca said.
The report notes that several developments could change short-term market dynamics and should be monitored closely.
“These include natural gas prices, which could quickly change due to geopolitical events or an upcoming cold winter in the northern hemisphere.
“Additionally, changes in phosphate export strategies from China and Morocco could have an impact. Finally, new Indian and Chinese tenders for potash are also important factors to watch,” Fonseca said.
When the expected margins for farmers and the global acreage of key agri commodities are taken into account, RaboResearch expects to see marginal growth in fertiliser demand in the coming two years.
Nitrogen demand will likely continue to recover slowly in 2025 and pick up slightly in 2026.
Phosphate demand will remain under pressure in 2025, with limited growth in 2026.
Demand for potash, which currently has more favorable prices, is gently recovering in 2024. The recovery will likely slow in 2025, but increase again in 2026.
