Fertiliser Prices Tumbling

Ammonia has dropped to a 23-month low as U.S. demand has dried up and fertilizer producers have announced plant shutdowns over winter. Export sales also are off due to the impact of tight credit conditions on international sales. Terminals are reported to be full from reduced fertilizer applications this past autumn due to uncertainty about prices for both nutrients and crops. The ammonia spot market is $260/ton this month but demand is so slack and the sentiment is so bearish that buyers are uncertain whether the floor has been reached. There are reports of offers at $125/ton for first quarter deliveries, a low not seen since 2002, but no sales have been made.

A report by the ICISPricing.com subscription news service says market indicators point to a strong spring application of fertilizer that will absorb current ammonia stocks. And, in a recent presentation to analysts, Terra Industries vice president Joe Ewing pointed to a U.S. Department of Agriculture report projecting a significant increase in demand for corn, for ethanol in the United States during 2009. “Most recent estimate is an increase of roughly 1/3 over 2008,” said Ewing. “All this tells us that increased corn plantings will be needed next spring to prevent a further decline in already tight corn inventories. Projections indicate plantings will need to be at least in the area of 90 million acres.”

Are you familiar with the expression "talking your own book" Mr Ewing? Informa say that 2009 corn acres will only be a little over 82 million. If the price of corn and the cost of inputs doesn't justify it then you won't get your 90 million acres. Once again, the cure for high prices IS high prices.

So for now, the agricultural fertilizer market has gone into hibernation. From the U.S. Gulf to the Midwest, distribution and storage systems are backlogged. So, Terra Industries stopped production at its 500,000 ton/year ammonia plant at Donaldsonville, La., for six weeks of repairs. Agrium has shut production at its Fort Saskatchewan, Alberta, nitrogen unit. The plant includes a 465,000 metric ton/year ammonia unit and 430,000 tonne/year urea unit. This followed the closure of Agrium's 280,000 metric ton/year Redwater I unit in Alberta in November. Agrium also said it would reduce operating rates at other plants, but did not give details. PotashCorp.'s 1,500 metric ton/day O1 ammonia-making facility on Trinidad has been down for at least a month for maintenance and is reducing urea production as well.