Global Fertilizer Outlook - 6

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By Russ Quinn
DTN Staff Reporter

SAVANNAH, Ga. (DTN) -- A strong rebound in global fertilizer demand in 2020 is expected with more acres planted in the United States, according to a fertilizer analyst. Despite this positive outlook, there are some risks from across the world that threaten to alter this forecast.

Rajiv Ram, senior analyst of agriculture and fertilizer demand for CRU Int. Ltd., said during the global fertilizer demand outlook at the 2019 Fertilizer Outlook and Technology Conference held in mid-November in Savannah, Georgia, that 2019 had several challenges to demand from uncooperative weather to trade disputes. However, the demand prospects for 2020 look to improve.

STEADY DEMAND GROWTH

Global fertilizer demand has seen good growth since 2000, excluding the impact of the global financial crisis of 2008 and 2009. The world fertilizer demand in 2000 was at about 140 million metric tons (mmt), and by 2018, this number was at just under 200 mmt.

Ram said the global fertilizer demand number will be right around 200 mmt for 2019. No growth was seen because of two main reasons, he said.

The first reason is due to fewer planted acres in the U.S. in 2019 because of the extremely wet weather. Fewer acres planted led to fewer acres needing fertilizer applications.

The other reason for the steady fertilizer demand seen in 2019 was issues with fertilizer demand in China.

Ram said China's share of the global nutrient demand is large, but is falling. China nutrient demand in 2018 was 200 mmt, around 30% of the global demand, but by 2024, the number might drop closer to 25% of the global fertilizer market.

"There are several factors of why there is weakness in China," Ram said. "Unsupportive crop market fundamentals, falling application rates, increasing farm size and efficiency and changing fertilizer practice are all reasons for less Chinese demand."

China's fertilizer demand is evolving rapidly as falling nutrient demand is being seen on crops, but is being offset by increased applications on fruit and vegetable area. Overall, Chinese nitrogen and phosphate demand is falling and is forecast to continue to fall in the future, but potash use is rising, he said.

In 2018, nitrogen demand in China was at 25 mmt while phosphate was at 10 mmt. Both nutrients are expected to fall looking out to 2024, he noted. Potash is at just 10 mmt in use in 2018, and by 2024, this number could be over 10 mmt.

2020 BETTER FOR DEMAND

Ram said looking ahead to 2020, the global fertilizer demand outlook appears to be better, led by a strong rebound in U.S. fertilizer applications.

The U.S. fertilizer demand in 2018 was near 34 mmt, but dropped to around 32 mmt in 2019, he said. The forecast for 2020 is back around that 34 mmt level.

U.S. corn plantings are projected to jump in 2020, thus boosting demand for fertilizer, Ram said. Corn acres in the U.S. in 2019 were pegged at 89.9 million acres, and for 2020, this number could be closer to 93 million acres, he said.

One reason for the expected U.S. rebound in fertilizer demand in 2020 is fertilizer affordability indexes (an index of fertilizer and crop prices) are very favorable right now. DAP has never been more affordable, while urea is becoming more affordable along with ammonia and potash, he said.

Ram said another positive situation in global fertilizer demand is India's increasing use of urea fertilizers. While sales of DAP and potash were down, comparing the January-to-October period in 2018 to the same period in 2019, the sales number for urea increased 12%, he said.

"Key developments include greater efforts to streamline the fertilizer sector in recent years, it was an election year, and a late-season monsoon helped to boost the Rabi season," he said. "India's love affair with urea shows no signs of stopping."

GLOBAL ISSUES FACING DEMAND

Ram said there are some issues that threaten to cloud the bright fertilizer demand picture.

Hovering over the global fertilizer demand market is the chance of a U.S. recession, which would lower the demand for fertilizer. A CRU survey asked what the probability is of a U.S. recession in the next four quarters, and 43% responded the chances were 25% to 50%, he said.

An economic slowdown is a downside risk for U.S. fertilizer demand. Changes to economic growth affect nutrient demand as the last major recession in 2008 and 2009 pulled down the global nutrient demand, he said.

The other issue worth watching would be what happens with the U.S.-China trade war. One interesting aspect of the dispute is it has bolstered Brazilian fertilizer demand, he said.

With China purchasing more soybeans from Brazil, this caused a premium on the world market for Brazilian soybeans, Ram said. The Brazilian cropping areas continue to increase, a feature that was present before the trade dispute, but a number that is only set to increase.

As a result, Brazilian demand for fertilizer is expected to climb for the fifth-consecutive year in 2020, close to 30 mmt. In 2010, it was 15 mmt.

MEDIUM- AND LONG-TERM DEMAND

Global fertilizer demand in the medium term (from 2019 to 2024) is expected to see some growth. Fertilizer demand by 2024 could be over 200 mmt, with nitrogen seeing 1.2% growth, phosphates 1.7% and potash 1.8% yearly growth.

Ram said the largest volume change in fertilizer demand is expected to come in South America. The continent could see an additional 5 mmt of fertilizer demand added from 2019 to 2024, he said.

Meanwhile, Africa is expected to see high rates of growth in fertilizer demand, possibly a 5.5% increase in fertilizer demand. Other countries with high rates of growth include South America (3.8%) and Southeast Asia (3.2%), he said.

The long-term outlook (2024 to 2042) calls for increased efficiency measures in some regions. This might be slight lower usage in North America, Western Europe and Eastern Asia, but it will most likely be offset by rising fertilizer demand in other regions, such as in Eastern Europe, South America and Africa.

Ram said these long-term changes will mean changes in market shares in the future.

Regions like North America (16% in 2000 and a forecast of 10% in 2040) and Europe (17% in 2000 and 12% in 2040) could see smaller shares of the global fertilizer demand. Meanwhile, other regions such as South America (7% in 2000 and 16% in 2040) and Africa (3% in 2000 and 7% in 2042) could see some gains in demand, he said.

Russ Quinn can be reached at russ.quinn@dtn.com

Follow him on Twitter @RussQuinnDTN

(ES/AG/SK)

01/03/2020
News Source
DTN HEADNEWS