Macquarie and Rabobank sparred over potash price prospects,
and held some disagreement over the outlook for urea, but concurred that phosphate
values are to decline in 2013, weighed by sizeable supplies.
While Macquarie forecast potash prices "floating up through
the year", supported by a quest by US farmers to "take advantage of strong
commodity prices to replenish potassium soil levels that have been mined for
years", Rabobank unveiled a "somewhat bearish" outlook.
China's agreement this month to buy potash from North
American and former Soviet Union producers the main exporters at $400 a
tonnes, a drop of $70 a tonne on deals last year, "points to ongoing pressure
on prices and growing leverage of importers in contract negotiations", Rabobank
Indeed, expectations that a deal with China, the top potash
importer, would clear the air for further contracts, notably from second-ranked
India, may prove unfulfilled, given that India, with 1m tonnes in stock, may
have until June before requiring supplies.
"A key factor to monitor for Indian importers is the volume
and timing of potash demand in the US,
"In the scenario of slack spring application demand from the
US, India may be able to negotiate an even lower price than $400 a tonne as the
pressure on suppliers intensifies."
However, on urea, it was Macquarie which more pessimistic
largely thanks to a smaller estimate of US sowings of corn, a nitrogen hungry crop,
Rabobank, forecasting corn acreage of 39.5m hectares (97.6m
acres), said that such plantings implying that "farmers and other supply chain
participants would need to engage in timely buying of urea, instead of waiting
for the last minute".
Meanwhile, Indian demand, up 16% year on year in November, will
continue to rise in early 2013 after a delayed monsoon delayed sowings of rabi
However, Macquarie cautioned that US buying "could surprise
negatively", given the potential for unused nitrogen to be left in the soil after
drought restricted growth last year.
"Add to that a shift to soybeans from corn," for which Macquarie
pegged plantings at 95.5m acres - a decline which would be "not good for
nitrogen volumes" and the bank forecast only a small spring rise in prices "followed
by more supply weighting on prices through the balance of 2013".
However, both banks agreed on the prospect of phosphate
price declines, with Macquarie flagging a continuation of disappointment late
last year in US demand for the nutrient.
"Entering 2013, the bearishness continues with the market
now fully believing that the global supply/demand balance will have to tighten
in order to reinflate prices," Macquarie said.
While North and South American markets will provide some
price support in the first half of 2013, this will "weaken once again the back half".
Rabobank said that it expected phosphate prices "to remain
subdued", undermined by relatively strong applications last year, which means "there
is less need for consecutive seasons of higher-than-normal application".