Fertilizer Markets and Finance

On this blog I publish posts & news about what's new in the fertilizer industry and how it's markets are affected by geopolitical developments, environmental changes and monetary policies. I also focus on how farmers are affected by government decisions, and economic fundamentals of the market place. I am passionate about agriculture in Trinidad and write about problems farmers face in the agriculture industry especially in rural areas. Thanks for viewing.

Jonathan Mohan

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The destruction of Trinidad and Tobagos’ local banana market.

The geopolitics and economic stratagem of Uralkali’s bombshell will change the global potash oligopoly.
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KARACHI: Pakistan’s palm oil importers want their government to reduce duty on palm oil product imports from Malaysia just like the 15% duty cut made for Indonesia.

They said the Federal Ministry of Commerce had yet to implement the duty cut that was supposed to come into effect in early 2012.

A member of Pakistan Vegetable Oil Mills Association, Nasir Ibrahim, said Pakistan imported over two million tonnes of edible oil products that catered to about 76% of the total country’s edible oil consumption.

He said the country’s demand for palm oil usually increased around 6-7% two to three months before start of Ramadan.

“The country consumes around 2.2 million tonnes edible oil every year out of which 0.63 million tonne is contributed by the local growers and the remaining is imported to bridge the demand and supply gap,” he was quoted as saying by Pakistan’s Daily Times on Saturday.

Nasir said the import trade price duty should be increased or decreased in proportion to the changes in the price of imported edible oils in the international market.

Read more at The Star online

The global economy faces “major downside risks” as its recovery continues to be threatened by stresses in the euro area, the International Monetary Fund said in a report prepared for the Group of 20 nations.

The world economic expansion will slow to 3.3 percent this year from 3.8 percent in 2011, according to the surveillance report prepared for the meeting of G-20 finance ministers and central bank governors in Mexico City Feb 25-26. The euro economy is forecast to contract 0.5 percent this year, compared with growth of 1.6 percent in 2011.

“The overarching risk remains an intensified global ‘paradox of thrift’ as households, firms, and governments around the world reduce demand,” the Washington-based IMF said in the report. “This risk is further exacerbated by fragile financial systems, high public deficits and debt and already-low interest rates.”

“Advanced economies are experiencing weak and bumpy growth, reflecting both the legacies from the crisis and spillovers from Europe,” according to the report.

Read more at Bloomberg

Fertilizer consumption in India, the world’s third-largest potash importer, may tumble for a second year as rising prices of the soil nutrients deter farmers, cutting overseas purchases.

Consumption of di-ammonium phosphate and potash may drop as much as 35 percent in the year starting April 1, compared with normal use of about 15 million metric tons, said U.S. Awasthi, managing director of Indian Farmers Fertiliser Cooperative Ltd., which represents 55 million farmers. Demand this year is seen falling as much as 25 percent, he said.

The slump in Indian imports of potash may help cool a 42 percent rally in prices this year and lower earnings of Potash Corp. of Saskatchewan Inc. (POT), the largest fertilizer maker, and OAO Uralkali (URKA), Russia’s biggest fertilizer maker by market value. Farmers can skip potash use for a year without hurting yields, said A.K. Singh, deputy director general at the state-run Indian Council of Agricultural Research.

“It’s a question of how much one can afford,” Awasthi said in an interview today. “Any further increase in prices will have a severe impact, which will evaporate all demand. Farmers are using more of urea.”

IMF Canada potash export price surged to $470 a ton in October from $331.9 a ton at the end of last year, according to data compiled by Bloomberg.

Uralkali won’t cut potash prices for India after importers asked for a discount as the rupee slumped against the dollar, Chief Executive Officer Vladislav Baumgertner said in an interview last week. The rupee fell to a record 52.73 per dollar on Nov. 22 on concern Europe’s debt crisis will hurt demand for emerging market assets, prompting fertilizer importers to ask suppliers to lower prices.

Import Talks

Indian fertilizer importers will begin talks with global suppliers on next year’s purchases this week, Awasthi said.

“We are going to tell the suppliers that either you lose next year’s market or you come to the rescue now,” he said. “This is an unprecedented situation and we should help each other at this moment.”

Overseas suppliers last month agreed to cut prices of di- ammonium phosphate by $35 a ton and complex nutrients, which include a mixture of nitrogen, phosphate and potash, by $25 a ton for shipments from Dec. 1.

India’s potash sales dropped 58 percent to 975,200 tons in the seven months ended Oct. 31 from 2.3 million tons a year earlier, according to data from the Fertiliser Association of India. Sales of di-ammonium phosphate and monoammonium phosphate declined 21 percent to 6.14 million tons during the seven-month period, the data show.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net; Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net

To contact the editors responsible for this story: Richard Dobson at rdobson4@bloomberg.net; Sam Nagarajan at samnagarajan@bloomberg.net

India, the world’ second-biggest wheat and rice producer, will get discounts on some fertilizer imports from next month after buyers threatened to halt purchases because of the rupee’s plunge to a record.

Overseas suppliers agreed to cut prices of di-ammonium phosphate by $35 a metric ton and complex nutrients, which include a mixture of nitrogen, phosphate and potash, by $25 a ton starting Dec. 1, U.S. Awasthi, managing director of the Indian Farmers Fertiliser Cooperative Ltd., which represents 55 million farmers, said in a phone interview today.

India’s rupee fell to a record 52.73 per dollar on Nov. 22 on concern Europe’s debt crisis will hurt demand for emerging market assets, prompting fertilizer importers to ask suppliers to lower prices. The currency, which has plunged 15 percent in 2011, rose 0.6 percent to 52.07 at 3:32 p.m. in Mumbai today.

“We finally have some relief,” Awasthi said. “We have got reductions for loading from Dec. 1. This amounts to a 5 percent decrease in prices and we will be able to maintain farmer prices till March 31.”

Buyers, who sought a $36-a-ton cut in potash price, are still talking to suppliers for a discount, he said. Importers demanded a $50-a-ton cut for di-ammonium phosphate and $45-a-ton decrease for complex nutrients, Awasthi said Nov. 22.

Indian fertilizer makers climbed as lower import costs may help them maintain sales to farmers, who are paying record prices, for nutrients, said Tarun Surana, an analyst at Sunidhi Securities & Finance Ltd. in Mumbai.

Shares Gain

“A further price hike would have led to a decline in volumes,” Surana said. Raising prices “would have been really difficult” and reduced demand for the fertilizers, he said.

Rashtriya Chemicals & Fertilizers Ltd. (RCF) rose as much as 8.3 percent to 59.7 rupees in Mumbai trading, Coromandel International Ltd. (CRIN) climbed as much as 1.9 percent to 298.95 rupees, National Fertilizers Ltd. surged as much as 5.4 percent to 57 rupees and Zuari Industries Ltd. (ZUAR) increased as much as 2.7 percent to 530 rupees.

India’s potash imports may decline to 5.5 million tons in the year ending March, down 14 percent from 6.4 million tons a year earlier, P.S. Gahlaut, managing director of Indian Potash, said in September. The nation bought 6.6 million tons of urea, 7.4 million tons of di-ammonium phosphate and 1.17 million tons of complex fertilizers in the year ended March 31.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net

Algerian wheat imports rose more than 40 percent to 6.35 million metric tons during the first 10 months of this year, according to customs’ data.

That compared with imports of 4.52 million tons in the same period of 2010, the data showed. The value of the wheat shipments more than doubled to $2.42 billion.

Soft wheat imports climbed 51 percent to 4.95 million tons while shipments of durum wheat increased 12 percent to 1.39 million tons, the data showed.

The biggest suppliers of wheat to Algeria during the period included the U.S., France, Canada, Germany and Spain.

To contact the reporter on this story: Salah Slimani at sslimani2@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Japan bought 45,960 metric tons of food wheat and 315 tons of U.S. barley through a tender system introduced to loosen government controls on imports, the Ministry of Agriculture, Forestry and Fisheries said today.

Of the total wheat, 37,900 tons were from Canada, 6,900 tons were from Australia, 630 tons were from the U.S., and the remainder from France, the ministry said in a statement. The shipment of the grain must be made by Jan. 31, according to Masafumi Otsuka at the ministry’s grain-trade division.

The tender was held under the so-called simultaneous buy- and-sell system, in which food makers and trading companies jointly bid for grains of any origin and quality.

To contact the reporter on this story: Aya Takada in Tokyo at atakada2@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

Russia is poised to again become the world’s second-biggest wheat exporter as the nation’s biggest grain-port overhaul raises shipping capacity by as much as 67 percent in four years.

Government and private operators are spending $574 million to develop and add terminals on the Baltic, Azov and Black Seas and the nation’s rivers to end bottlenecks that keep trains waiting for weeks to unload. Supply is surging following an almost yearlong ban imposed by Prime Minister Vladimir Putin to conserve grain after the worst drought in half a century.

Russia’s emergence as a leading supplier may reduce global grain prices, said Peter Biermann, a trader at Aston FFI in Lausanne, Switzerland. “Russia could easily become the No. 1 exporter of wheat in the world” on the expansion plans, Biermann said. Aston is a trading unit of Russian grain and oilseed producer OAO Aston.

Russia is seeking to again become a leading wheat supplier about three decades after the cost of imports helped push the Soviet Union to the brink of bankruptcy in the 1980s. Exports began climbing in 2001, and in 2002 Russia was among the top three wheat-exporting countries, according to U.S. Department of Agriculture data.

It may export more than 12 percent of global wheat this season, the International Grains Council says, making it the world’s fourth-biggest supplier. The ban was lifted on July 1.

Hidden Costs

The new investment may increase grain loading capacity to almost 42 million metric tons in 2014 from 25 million tons this year, according to Bloomberg calculations based on investors’ plans.

More terminals will reduce the hidden costs of grain shipments by at least $15 a ton because exporters won’t have to pay for the idle hours that rail cars and ships spend in bottlenecks or for fines for delayed cargoes, said Igor Pavensky, head of Rusagrotrans’s market analysis department. Rusagrotrans is the country’s bigger carrier of grain by rail.

Russia may be able to widen the discount at which it sells grain in international tenders by $7 to $8 a ton by 2015, Pavensky said. Russian wheat now sells at a discount of about $10 a ton compared with French milling wheat from Rouen, he said.

Government and private operators plan to invest at least 18.2 billion rubles ($574 million) to add 18.9 million metric tons of capacity at grain terminals in the five years through 2014, according to Bloomberg calculations based on company plans. That includes additions last year during the export ban.

Asia, Cuba

Lower logistics fees will allow traders to open up new markets, Rusagrotrans’s Pavensky said. Russia may supply up to 4 million tons of grain to the Asia-Pacific region and up to 2 million tons to South America and Cuba by 2020, he said.

Dry weather is hurting crops from the U.S. to Ukraine. Mexico’s Grupo Bimbo SAB, the world’s largest bread maker, and CSM NV of the Netherlands, the biggest manufacturer of bakery ingredients, are among companies that have increased prices to pass on higher costs.

The Russian ban sent wheat futures to a 29-month high on Feb. 14, with prices jumping as much as 91 percent from the end of June 2010 to that peak. Since then, prospects for rising global output in countries including Russia, and the slowing economy, have cooled the increase. Prices, at $6.58 a bushel today on the Chicago Board of Trade, are down 28 percent from their high.

Weather and Politics

“Cheaper input costs will allow Russia to export at more competitive prices to the Mediterranean and beyond,” said Swithun Still, a trader at Switzerland’s Alegrow SA. “However, as last year showed, we are at the mercy of the weather and politics, two things we cannot predict very well or control.”

Putin imposed the grain export ban to shore up domestic supply after the drought caused Russia’s grain crop to plummet 37 percent to 60.9 million tons last year, from 97 million tons a year earlier.

Handling prices have been rising because of capacity limitations, spurring state and private investors to build terminals, Alexander Korbut, vice president of Russia’s Grain Union, said by phone on Sept. 22. At one terminal in the port city of Novorossiysk on the Black Sea, fees jumped about 40 percent to $28 a ton from a year ago and at another by about 35 percent to $23, he said.

Grain handling is “extremely profitable in Russia,” Korbut said. “When small ports appeared on the Azov Sea in 2006 to 2008, investors made a return in just one season.”

Rail Cars

Plans to boost exports may stumble on a lack of railway infrastructure and rail cars; rising transportation costs; and market demand, according to the Institute for Agricultural Market Studies, known as Ikar.

About half of the projects are located in the city of Novorossiysk, where OAO Russian Railway banned rail shipments on Aug. 27 because of congestion. The restriction to one terminal was lifted after 10 days and to the other after almost three weeks.

Most of the new projected capacity, or about 13 million tons, may be devoted to wheat exports, according to Ikar. This amounts to 10 percent of the world’s wheat imports, a quantity Russia will find hard to grab from existing suppliers, Ikar director Dmitry Rylko said by phone on Sept. 26.

Ukraine, Russia’s neighbor and the world’s third-biggest barley exporter last season, may compete with Russian projects as it has about 6 million tons of surplus export capacity already, according to Rylko.

Ukraine, Kazakhstan

While Ukraine increases capacity, now at about 30 million tons, Kazakhstan also has ambitious plans to expand its wheat- export potential and the U.S. may also increase grain shipments in five years, he said.

“Still, we need the terminals,” Rylko said. “They’re being built with room to grow and so we can at least maintain exports.”

Private building efforts are already underway. Delo Group, beneficially owned by Sergei Shishkarev, head of the transport committee in Russia’s lower house of parliament, opened a terminal in Novorossiysk this year, according to the group’s press service. Vladimir Lisin, the billionaire owner of OAO Novolipetsk Steel, built a terminal in Tuapse last year, according to his UCL Holding company.

In addition to Novorossiysk and Tuapse, investment is also flowing into construction of terminals and expansion of existing capacity in Kaliningrad on the Baltic Sea, in Taman on the Black Sea, on Azov Sea ports and on the Volga and Don rivers.

A government plan to construct another deep-water grain terminal at the port of Taman, on a peninsula between the Black and Azov Seas, may further expand capacity at least 6 million tons by 2017, state-controlled United Grain Co. said last week. The terminal may cost 10 billion rubles, according to a company presentation last year.

“A fight for clients who supply grain will emerge,” Korbut said. “This will increase the profitability of growing grain.”

To contact the reporters on this story: Marina Sysoyeva in Moscow msysoyeva@bloomberg.net Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net;

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Egypt, the world’s biggest wheat buyer, plans to boost imports this year to build domestic stockpiles and prevent future political unrests fueled by high food prices, the nation’s Agricultural Export Council said.

Overseas purchases may rise to 10.5 million metric tons in the year starting July 1 from 9.8 million tons a year earlier, Hisham El Attal, board member of the council, said in an interview in Singapore today.

El Attal’s import forecast is higher than the 10 million tons estimated by the U.S. Department of Agriculture on Sept. 12 and may help limit a 14 percent slide in wheat futures this year. December-delivery wheat gained 0.9 percent to $6.7925 a bushel on the Chicago Board of Trade at 5:41 p.m. Singapore time.

Egypt will take advantage of the slump in prices to rebuild stockpiles and enable the government to immediately supply the market in case of any unrest, he said.

Protests toppled leaders in north African nations of Egypt and Tunisia while riots erupted from Bahrain to Morocco this year, in part because of high food prices.

Food-price inflation concerns for policy makers are set to persist even as rice declines and wheat trades below this year’s peak, according to the United Nations, which said that importers are still paying more than a year ago.

Another year of bumper wheat and rice harvests, as well as a continued surplus in corn, is needed to bring stockpiles back to “healthy” levels and reduce inflation concerns, Abdolreza Abbassian, senior economist at the UN Food & Agriculture Organization, said in an interview in Singapore today.

China, the largest consumer, may also boost purchases of wheat to 1.5 million tons in 2011-2012, from 1.3 million tons a year earlier, as millers seek high-grade variety to blend with local supply, Haiguang Shi, vice president of the Canadian Wheat Board, said at a conference in Singapore today.

The Turkish fertilizer sector is essentially import-dependent. Turkey lacks the raw material resources to produce compound fertilizers. Hence, local fertilizer companies import 95% of the necessary raw materials, such as natural gas, phosphate rock and potassium salts. These fertilizer companies have a non-integrated production structure, due to this import dependence. And this non-integrated production structure brings low margin business to companies.

Turkey’s annual fertilizer consumption is about 5mn tons in growth periods. It has registered two significant declines in the past 10 years, namely 2001 and 2008. These were both recession years in Turkey, during which consumption decreased by 20% to 4.2mn tons. Of total consumption, 60% derives from domestic production, 40% from imports. Due to the lack of raw materials, Turkish fertilizer consumers are also trading companies, importing both raw materials and end-products and then selling them on the domestic market.

South Korea, the world’s third- biggest corn buyer, plans to secure more farmland overseas to grow crops such as corn and wheat and secure a stable supply amid surging food prices.

The North Asian nation wants to secure a total of 380,000 hectares of overseas farmland by 2018, the agriculture ministry said in an e-mailed statement today, without giving a comparative figure. That area can produce about 1.38 million tons of corn, wheat and soybeans, or about 10 percent of the nation’s annual imports of the three major crops, it said.