A FERTILISER industry insider has said that while there could be a short-lived decline in fertiliser prices from current record levels, ongoing support would keep prices strong.
The market is scrambling to assess what is happening in China, one of the world's largest fertiliser producers, after reports that some major Chinese producers would temporarily halt exports to ensure domestic supply and to keep a cap on fertiliser prices there.
Deepika Thapliyal, senior editor manager at ICIS (the Independent Commodity Intelligence Service), said prices remained high in spite of the normally quiet late summer period in the northern hemisphere.
Ms Thapliyal said while supplies were set for most producers for August the balance sheet for most crop nutrients is tight with new demand expected to emerge in September.
She said while a downward correction was expected after record price increases, buyers were likely to swoop in on product once prices come off slightly, while traders may also look at the opportunity to build long positions.
Ms Thapliyal said the fertiliser market was reacting not only to grain-price related demand but also to high manufacturing costs, with feedstock and gas prices set to keep production costs elevated.
She said the industry was reacting to the good demand for fertiliser with new manufacturing facilities, such as a 4 million tonne capacity nitrogen plant in Nigeria and ammonia and phosphate expansions in Saudi Arabia, but cautioned these were unlikely to have significant impact on the market for around 12 months.
Currently, urea prices are softening for the first time since May, with increasing exports from China.
However, Reuters has reported that major Chinese exporters, especially those with state connections, may not be sending out product as pressure mounts due to record domestic fertiliser prices.
And Ms Thapliyal said with Brazilian and Indian demand set to recommence shortly any downward correction was likely to be short-lived.
On the phosphate front, Ms Thapliyal said the seasonal lull was the dominant factor, with even India, where there is a need for diammonium phosphate (DAP), buying appetite remains muted due to the tight availability and high international prices, although a good monsoon means farmers will look to maximise yield potential with good fertiliser rates.
Again, China will be important in the phosphate space, as the largest exporter in the world, with Reuters reporting it shipped 3.2 million tonnes of diammonium phosphate fertiliser in the first half of this year as well as 2.4 million tonnes of urea
In Australia there is solid demand for urea in spite of farmgate prices rising to between $750 and $800 a tonne.
The strong seasonal conditions across virtually the whole country mean that more urea will be top-dressed than usual.
Several shipments of fertiliser have arrived in recent weeks, however the industry is still prepared for localised short-term supply hiccups as it waits for boats to arrive.
Farmer groups have generally said while the rise in prices is not a good thing they still see a good return on investment from nitrogen applications due to the high grain prices and the relatively low risk seasonal conditions.