P/KToday: North American Potash and Phosphate Production to Soften

September 24, 2015 01:11 PM


Phosphates and potash softened on the week.

  • DAP $30.84 below year-ago pricing -- lower 17 cents/st on the week to $554.40/st.
  • MAP $31.17 below year-ago -- lower $9.82/st this week to $575.44/st.
  • Potash $32.12 below year-ago -- lower $6.45/st this week to $447.84/st.
  • The average cash corn price figured in to P&K this week is $4.05.
  • The national average corn basis softened 3/4 cents from last week to 19 cents below December futures. The national average cash corn price softened 3 1/4 cents from last week to $3.64. Basis is much softer than the three-year average, which is 12 cents above futures for this week.

9242015PhosphateThe big news this week is MosaicCo's potash production cuts alongside already stifled phosphate production. Like much of the ag industry, Mosaic has examined its prospects for the upcoming year and noted that U.S. P&K demand is likely to remain lackluster in the upcoming fall and spring application seasons. Specifically, here is what they said, "We are managing our production levels to match current demand, controlling our costs, and maintaining our discipline," said Joc O'Rourke, the Mosaic chief executive.

Part of the cutbacks will include an extension of already scheduled maintenance at Mosaic's Colonsay, Saskatchewan potash mine in western Canada. Some news reports even suggest Mosaic will abandon the Colonsay mine altogether. Weak North American and Brazilian demand for P&K suggest slow sales and low sales volumes in the coming quarter, and Mosaic has projected both operating margins and sales volumes to drop toward the low end of their previous guidance.

In response, Mosaic's shares fell to a six-year low, prompting investment banks to lower their price targets and fiscal expectations of the company.

9242015PotashIn our survey, this week phosphate and potash prices are down. Wholesale watchers note that Chinese phosphate prices are roughly $10 below domestic wholesale prices. If U.S. phosphate manufacturers prefer to let China shoulder the production risk, it would appear that will work in favor of American growers. The U.S. import season is drawing to a close as the seasonal closure of the Mississippi shipping lanes nears. That will leave buyers with supplies of cheaper Chinese imported product in a position to offer a lower retail price. That may suggest it is better to book phosphate earlier rather than later as storehouses will rely on domestic product to fill winter inventories.

So as Mosaic maintains its low phosphate production levels, Chinese imports may be able to moderate price increases if import volumes are strong enough to outweigh domestic product volumes. It is so far unclear how weakness in the Brazilian real will impact P&K demand there. Experts expect Brazilian soybean acres to increase which may bring extra demand for MAP, but corn acreage is expected to drop, possibly to record lows in Brazil which would leave demand for DAP very weak.

For now, we have 80% of our fall P&K booked and will stand pat. For spring, we will wait as long as we can and as demand discovery takes place through the winter months, we will look for opportunities in the offseason for spring. Phosphate prices through the winter will depend largely on the balance between domestic phosphate and Chinese product. If that balance weighs in favor of Chinese phosphate, prices will remain low. If domestic phosphate outweighs imported P in U.S. storehouses, prices will likely firm.


By the Pound --

DAP is priced at 58 1/2 cents/lbP2O5, 1/4 cent lower on the week; MAP at 54 1/2 cents/lbP2O5, down 1 full cent; Potash is at 37 3/4 cents/lbK2O, down 1/2 cent on the week.

The following is an updated table of P&K pricing by the pound as reported to your Inputs Monitor for the week ended September 18, 2015.

P&K pricing by the pound -- 9/24/2015

DAP $P/lb

MAP $P/lb
Potash $K/lb
$0.58 1/2
$0.54 1/2
$0.37 3/4
$0.61 1/2
$0.57 1/2
$0.39 3/4