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February 13, 2020
Fertilizer prices at home had been moving lower for several months, but I've started to notice a few ticking higher compared to last month, i.e.: anhydrous and UAN32. I'm not sounding any alarms, but I do think we need to take notice and pay attention for a moment, especially with the coronavirus still brewing inside China.
Remember, China is the world's largest producer of fertilizer and also a controller of some key crop chemistry. I've heard the shortage of workers has stalled production at mines in several parts of the country and has started to squeeze supply in some locations. Traders are also saying some areas are struggling to transport key ingredients across China because of disruption in the trucking industry. In fact, some traders in China have stopped offering quotes to customers because they can't source reliable delivery times.
I'm not saying this is going to have an immediate direct impact on U.S. fertilizer supplies, but it could cause ripples across the global supply chain and create some hiccups. The U.S. has gradually been reducing imports from China and has access to several markets for procuring fertilizers, given the growing and abundant supply of fertilizers worldwide. Most of the phosphate imports into the U.S. as of late have been from Russia, while most urea imports came from Qatar, Canada, Algeria and Russia.
From my perspective, the risk-to-reward ratio may have temporarily shifted. In other words, the risk associated with waiting for prices to move lower might not be worth the reward? Remember, DAP, MAP and anhydrous are all down close to 20% compared to last year depending on location. UAN28, UAN 32 and urea are thought to be down 10-15% compared to last year, and potash down 3-5%.
Bottom line: Yes, prices in some areas could continue to trend a bit lower, but I like taking some of my input risks and gains off the board when situations start to change and become more fluid. We've seen some good price breaks, now the situation in China evolves and it could create an unknown.
Kevin is a leading expert in Agricultural marketing and analysis, he also produces an award-winning and world-recognized daily industry Ag wire called "The Van Trump Report." With over 20 years of experience trading professionally at the CME, CBOT and KCBOT, Kevin is able to 'connect-the-dots' and simplify the complex moving parts associated with today's markets in a thought provoking yet easy to read format. With thousands of daily readers in over 40 countries, Kevin has become a sought after source for market direction, timing and macro views associated with the agricultural world. Kevin is a top featured guest on many farm radio programs and business news channels here in the United States. He also speaks internationally to hedge fund managers and industry leading agricultural executives about current market conditions and 'black swan' forecasting. Kevin is currently the acting Chairman of Farm Direction, an international organization assembled to bring the finest and most current agricultural thoughts and strategies directly to the world's top producers. The markets have dramatically changed and Kevin is trying to redefine how those in the agricultural world can better manage their risk and better understand the adversity that lies ahead.
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