Fertilizer market outlook: Three factors supporting high price longevity

Perhaps the only thing that made 2022 fertilizer prices palatable was the equally high commodity market prices. However, as farmers look ahead to the 2023 growing season, many are wondering if the high input prices are here to stay, even against declining commodity prices.

Josh Linville is the fertilizer director with StoneX Financial, and says that the answer to the longevity question depends on several factors. All things considered, he says growers should not be surprised if the volatile market we’ve seen over the past while persists into the next growing season.

“We don’t think volatility is going away. We just gone through 24 months at some of the biggest volatility we’ve ever seen for this sustained kind of period. When we started looking for major products – nitrogen, phosphate and potash – our main point that we’re watching globally on nitrogen is European natural gas,” says Linville.

The price of nitrogen is what will be directly affected by the European natural gas prices, where phosphate price will be largely determined by the amount that is to be exported to China. When looking at potash prices, Linville says prices are dependent on whether or not Lithuania will allow Belarus to export.

Additionally, Linville says commodity market prices will also play a factor. As stated, the 2022 fertilizer prices were doable for many producers because the commodity prices were also skyrocketing, however, if grain prices don’t stay elevated, growers won’t be able to afford the inputs, which will at some point play a factor into the pricing scheme.

“With grain prices falling, it makes it that much harder for the farmer to pull the trigger. If the farmer is not going to pull the trigger, the retailer is going to pull the trigger, if the retailer doesn’t pull the trigger, now your supplier and your producer, they have a lot more pressure on them. They’re like ‘I like selling this stuff, I really liked my margin, let’s drop our price a little bit and bring that demand forward’, so that’s where you start to see these little bit of a bear slide,” explains Linville.

For now, he says growers should anticipate higher than normal fertilizer prices moving forward keeping in mind any one of the aforementioned factors could make a significant impact on the market as those global situations develop and commodity prices level out.

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