Josh Linville, vice president of fertilizer at StoneX Financial Services, said the outlook for nitrogen fertilizer has improved over the past 12 months. "From a U.S. perspective, urea is the most expensive nitrogen source. UAN (urea and ammonium nitrate) and NH3 (anhydrous ammonia) are both higher than the typical premium for urea, and we see many signs that farmers are turning to locking in savings," Linville said. "If this situation occurs on a large scale, it may cause an imbalance between supply and demand in the United States/Canada, which will have an impact on prices."
At the center of last year's surge in nitrogen prices was the productivity of natural gas in Europe, as natural gas prices determine the cost of ammonia and nitrogen. High natural gas production costs shut down almost all production there.
In addition, a year ago, the war between Russia and Ukraine led to a surge in nitrogen prices, as Russia provided 20% of the global fertilizer supply. Belarus exports 20% of global supply of potash fertilizer. The view at that time was that exports would almost stop due to the economic sanctions imposed by the West on both countries. However, strong global protests against food security have led to policy changes. In the end, Russia maintained commercial relations with non Western countries, with almost no change in nitrogen exports. The third major focus is on China's urea exports. In the autumn of 2021, China banned urea exports. "Many people believe that this situation will continue. Although overall exports fell significantly in 2022, there are signs of recovery," Linville said.
On the other hand, he said that since March/April of last year, the price of potassium fertilizer has almost continued to decline, as farmers have reduced the amount of fertilizer applied to resist historically high prices.
"Although current values are still high compared to historical values, they match current grain values very well, which may mean that demand is higher than expected," Linville said.
