Fertilizer prices continue to fall

Fertilizer prices are down. Urea, for example, has shown a drop of approximately 40% since the beginning of the year, reaching Brazilian ports below USD 300 per ton CFR, a value not seen since January 2021. The expectation is that this downward trend will also continue for Monoammonium Phosphate (MAP) and Potassium Chloride (KCl) for the rest of the year. The assessment is contained in a Rabobank report.

The price of KCl could be further pressured by the renegotiation of the Chinese contract in June 2023, which established the value of US$307 per ton CFR, a surprise for the market and which triggered rumors of a possible renegotiation of the Indian contract closed in April . For Brazil, this configuration could represent an excellent market opportunity.

As for MAP, one of the main reasons for the drop in prices is the excess supply of the product on the global market, aggravated by the return of Chinese exports. Greater supply in a market still recovering should put even more pressure on prices during the second half of the year.

With regard to MAP imports, the quantity imported in the first five months of the year is the largest in the historical series, with around 2 million tons arriving at Brazilian ports, against a historical average for the same period of 1,3 million tons. tons.

For the next soybean harvest (2023/24), to be planted from September/October this year, it is expected that there will be no risk of fertilizer shortages. Furthermore, the cost of fertilization should be almost 40% below last harvest, taking into account fertilizer prices until mid-June. Other costs, such as pesticides and seeds, should also be lower, leading to a reduction of at least 16% in the operating cost of the 2023/24 soybean harvest.

However, the drop in the value of soybeans, compared to last year, should put pressure on margins for the 2023/24 soybean harvest. Therefore, a lower spot margin could end up leading to a smaller increase in fertilizer consumption in 2023.

Despite this, Rabobank's vision indicates a 10% increase in deliveries to the end consumer compared to 2022. However, it is crucial to monitor deliveries in the coming months to confirm this forecast.