Credit Suisse questioned potash groups' hopes of a revival in potash demand by forecasting a drop in world shipments this year, and cutting price estimates, citing "extreme caution" among distributors.
The bank warned that it was "now sceptical over whether potash prices can regain the momentum seen last year".
Indeed, a "sharp" rebound in volumes, fostered by unexpectedly prompt deals to supply China, the top importer, look set to peter out.
"We believe that volumes could weaken again in the second half [of 2012]," Credit Suisse said, forecasting a fall to 52m-53m tonnes in world shipments this year, below last year's 55m tonnes.
The figure is also below the 56m-58m tonnes forecast two weeks ago by Uralkali, the Russian potash giant, and an estimate of "up to" 58m tonnes from K+S, its German rival.
'Extremely cautious'
Credit Suisse's forecast reflected an observation that "distributors remain extremely cautious, given the uncertain grain price outlook, and are looking to defer new purchases until there is greater clarity around the US crop size and grain prices".
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Credit Suisse Vancouver potash price forecasts, (change on last)
2012: $546 a tonne, (-$14 a tonne)
2013: $550 a tonne, (-$40 a tonne)
2014: $530 a tonne, (-$40 a tonne) |
Fertilizer prices often move in line with grain values, which determine farmers' returns and thus their willingness to splash out on products, such as nutrients, to raise yields.
Chicago corn futures are, at $5.38 a bushel on Monday for December delivery, factoring in lower prices than the $6.00-6.40 a bushel US growers are expected to receive for their last harvest, according to Washington estimates.
The bank forecast that "good industry discipline", besides the impact of maintenance closures in the July-to-September quarter, would keep the market "balanced", and "limit downside risk" to potash prices.
Nonetheless, unless a supply shock kicks in the "upside" for values "may be limited" too, Credit Suisse said, cutting price forecasts - particularly for the US Midwest market, where potash would average $535 a tonne this year, $40 a tonne lower than previously expected, and $530 a tonne in 2013, a downgrade of $80 a tonne.
Caught unawares
Conversely, the bank raised its forecast for world urea prices this year, after an early US sowing season caught unaware distributors who had delayed restocking of the nitrogen-based nutrient.
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Credit Suisse US Gulf urea price forecasts, (change on last)
2012: $454 a tonne, (+$76 a tonne)
2013: $360 a tonne, (+$20 a tonne)
2014: $340 a tonne, (+$20 a tonne) |
"Over the past two months, US Gulf urea prices surged from the high $300s a short ton to over $700 a short ton," Credit Suisse said, also noting smaller price rises in other markets.
"Supply outages and the early planting season had distributors and traders scrambling to cover their short positions."
The bank kept unchanged its forecasts for phosphate prices, which foresee small declines in values ahead.
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