Canada: Fertilizer prices drop relative to grain

It might surprise some farmers to hear there are “phenomenal” bargains in the fertilizer market today.

Josh Linville, vice-president of fertilizer with StoneX, recently tweeted a chart showing the number of tonnes of canola required to pay for one tonne of urea.

That value was 0.4 tonnes as of March 3.

“Today is nearly the best ratio value we have seen since 2000,” he said.

“Big opportunity. Talk to your retailer.”

Linville realizes that kind of talk makes him a target for harsh criticism from farmers who are facing historically elevated fertilizer values at retail outlets.

But fertilizer prices have dropped a lot in the last year relative to grain prices. The urea barge price in New Orleans, Louisiana, was $300 per tonne as of late-February, down from $925 last March-April.

“Farmers are using less canola to pay for their urea than almost any time in the last two and a half decades,” he said in an interview.

Linville noted the fertilizer price/grain price ratio will vary by region.

“You need to work with your retailer and look at your numbers there at home, because that ultimately tells the story,” he said.

He delivered a similar message for an American audience during a Feb. 23 presentation at the U.S. Department of Agriculture’s 99th Annual Agricultural Outlook Forum.

December corn futures were US$5.92 per bushel at that time and NOLA urea was $315 per tonne.

So, one tonne of urea was costing U.S. farmers 53 bu. of corn compared to 140 a year ago.

“Today is phenomenal value from this perspective,” he said.

Urea is the biggest bargain for nitrogen fertilizers.

A main reason for the fall in urea values is because European natural gas prices have plummeted to $14/mmbtu (million btu) from a high of $103 last year.

That has caused European urea production to rebound to about 60 to 65 percent of normal from a low of 20 to 30 percent last year.

Europe only accounts for five percent of global urea production but that is still 11.3 million tonnes of product, and it has a profound effect on prices.

The UAN market is heavily influenced by Russia, which is responsible for one out of every three tonnes of global exports of the commodity.

Russia is facing sanctions from many importing regions of the world. A lot of UAN markets are western countries that are vehemently opposed to Russia’s invasion of Ukraine.

Russia is the world’s biggest exporter of anhydrous, shipping out 4.4 million tonnes of the commodity in a normal year.

Exports have plummeted because that product gets to market via a pipeline that runs through Ukraine to Black Sea ports.

“Are you going to run anhydrous through a pipeline where there’s a war zone? Absolutely not,” he said.

“Russia’s exports after March have come to a standstill.”

North American farmers who use UAN and anhydrous are sick of paying huge and growing premiums compared to urea.

Linville has spoken to loads of farmers who plan to switch over to the lower-priced nitrogen fertilizer this spring.

The phosphate market does not have the same level of competition as a product like urea.

China, Morocco, Saudi Arabia, Russia and the United States account for 86 percent of global exports.

The U.S. has import duties against China, Russia and Morocco.

That leaves the U.S. domestic market that is dominated by one producer, who also has a controlling interest in Saudi Arabia’s plant.

Phosphate prices have fallen to $600 per tonne, down from $1,000 to $1,100 per tonne last year. The drop is big, but not as pronounced as urea.

Linville said farmers are looking at “OK” prices for phosphate. The phosphate-to-new-crop-corn-ratio is hovering in the middle of its five-year average.

If the price gets too high in the spring, growers will reduce application rates or even hold off for a year.

Canada, Russia and Belarus account for 73 percent of global potash exports.

“If we thought phosphate didn’t have a whole lot of competition, it’s a lot skinnier here,” said Linville.

Russia and Belarus are not on good terms with the U.S.

“Thank goodness we have Canada to the north of us,” he said.

While potash prices remain elevated, the potash-to-new-crop-corn-ratio shows some of the best value in a long time.

Tags: prices, Production, Market, urea, fertilizer, corn, grain, canola