Phosphate and potash demand is set to rise, even if
agricultural commodity prices remain suppressed, a Mosaic executive told
Corrine Ricard, senior vice president at the US potash and
phosphate producer The Mosaic Company, said that depleted inventories, both in
the soil and in industry pipelines, would increase demand.
Ms Ricard said that that lower commodity potash and
phosphate markets had worked their way through to retail fertilizer pricing.
"This, combined with the large crops, which have led to a
meaningful drawdown in the nutrient levels in the soil, have resulted in farmers
increasing application rates," Ms Ricard said.
"This may sound counterintuitive given corn, soybean and
wheat prices are at a lower level, but it's indicative of the sentiment of the
industry which we share that potash and phosphate prices have bottomed."
Demand to rise even
without crop market rally
Mosaic forecast global phosphate demand to grow by 11% over
the next five years, with the biggest increases in India and Brazil.
Global potash demand was forecast to rise by 17% over the
Ms Ricard also noted that since 2014, pipeline inventories
have been falling as fertilizer dealers avoid holding inventory, given the
downtrend in the market.
"So today, channel inventories are at very low levels in
many areas of the world, North America, Brazil, India, to a lesser extent, in
China," Ms Ricard said.
"So we expect shipments to be strong even without a big
rally in grain prices."
Tight Chinese market
Phosphate markets will get a boost from tight Chinese production,
"We believe Chinese exports will drop again in 2017 to
around 8m metric tonnes from a high point of over 11.5m metric tonnes
approximately 2 years ago," Ms Ricard said.
"If the decline is more significant than these predictions, we
could see an extremely tight phosphate market."
to slow production
Chinese phosphate imports are falling, due to more stringent
pollution laws in China, Ms Ricard said.
"Air and water quality have become major social issues in
China, and we're seeing the government take enforcement action, in some cases
shutting down the heaviest polluters, including a number of coal-based
phosphate production-related facilities."
Increased regulations, to come in this year, will increase
the average cost of production.
"These changes may also push the higher cost producers out
over time," Ms Ricard said.
"How much higher, and exactly when the industry margins will
be impacted, is difficult to predict, but this is an important development to
keep an eye on and, potentially, game-changing impact on global phosphate
for FSU potash producers
There is also room for further price-appreciation in potash,
Ms Ricard said, as currencies in the former Soviet Union bounce back, increasing
headwinds for producers in those countries.
Ms Ricard also so prices potentially supported by smaller-than-expected
capacity increases, the shrinking of existing capacity during the low-prices of
the past couple of years, and "very strong" demand.
"One thing we're fairly confident of is that there's more
upside for potash prices than down," Ms Ricard said.