Fertilizer prices are following crop values in a rally, major nutrient producers said, citing support from limited supplies of the likes of potash and phosphates, at a time when enhanced farmer profitability is boosting demand.
Potash prices, which “improved considerably” over the second half of 2020, over which they by nearly $100 per tonne in the US Midwest, are continuing to rise this year, Canada-based Nutrien said.
The group cited “demand momentum” which “continues in 2021, supported by favourable crop economics”, at a time of “limited inventory build-up in major markets”, with Nutrien saying it was itself “fully committed” on North American sales into the April-to-June period.
World phosphate prices, meanwhile, “have continued to trend higher in early 2021, driven by tight supply and higher input costs”.
‘Rapid price increases’
Separately, rival Mosaic, noting that “global demand for grains and oilseeds remains high and farm economics remain robust, said that “strong demand has driven rapid price increases in the United States and globally”.
The group forecast “strong global fertilizer demand in 2021”, which in its own potash operations would be reflected in an increase of $20-25 per tonne in prices achieved in the January-to-March period, compared with the $176 per tonne realised in the previous quarter.
For phosphates, the group - noting that “demand is strong globally, and producer and channel inventories remain well below normal ahead of the North American application season” – forecast achieving an increase of $40-50 per tonne in its sales price, from the $363 per tonne achieved in the last three months of 2020.
That would be the highest price achieved since late 2018 for the group, which said it “expects [the] global supply and demand balance to remain tight through the year”.
‘Higher prices and volumes’
The comments came as both groups released results for the October-to-December quarter which beat market expectations.
Mosaic bounced back from a loss of $921.0m in the fourth quarter of 2019, reflecting charges associated with capacity closures, to post earnings of $827.9m, on revenues up 18.4% at $2.46bn.
Adjusted earnings per share, at $0.57, ahead of the $0.20-per-share result Wall Street had expected.
The group’s phosphate operation showed particular improvement, “driven by higher prices and volumes”, and reporting an underlying gross margin of $73 per tonne, contrasting with a negative $45-per-tonne result a year before.
Nutrien reported earnings of $316m for the quarter, compared with a loss of $48m a year before, on revenues up 17.0% at $4.05bn.
Adjusted earnings per share, at $0.24, came in ahead of the $0.17-per-share figure investors had expected, with the improvement led by a 48% jump to $220m in underlying ebitda at the potash operation.
This achieved “higher domestic and offshore sales volumes, and lower cost of goods sold per tonne”.
Adjusted ebitda in the retail division rose by 29% to $297m, backed by stronger sales of fertilizers, pesticides and seeds.
Nutrien forecast its 2021 earnings coming in at $2.05-2.75 per share, up from the $1.80 reported for 2020.
The forecast was, at its mid-point, in line with the figure of $2.38 per share that investors have factored in, according to Refinitiv.