Viewpoint: US phosphates on upturn going into fall

The US phosphate market approaches the fall season on firmer ground than a year ago thanks to improving crop prices and inventories drawn low by heavy exports.

Phosphate prices are beginning to climb as a result, ending an extended stalemate between buyers and sellers that saw thin trade and a range-bound market at $305-$315/st fob Nola from 6 April to 13 July.

US stockpiles of DAP and MAP are thin as the combination of a strong spring sales book, large export lineup and lack on supplemental imports worked in tandem to clean out the river system and leave warehouse bins empty. An extended spring planting season allowed for wholesalers to minimize summer carry-over.

While domestic demand cooled after the spring, US exports focused on supplying South America and India, while imports dried up.

Offshore producers bypassed the US market from May-June this year, offsetting a slight drop in US phosphate exports. US DAP/MAP imports in May totaled 8,793t, the lowest since July of 2015. In June, an estimated 60,000t of DAP/MAP was slated to arrive in Nola, compared to 50,000t imported in June 2016.

That scenario has caused DAP prices to climb by $8/st since 14 July to $320/st fob Nola.

Imports to the start of the 2017-18 fertilizer year have increased, with an estimated 333,000t DAP/MAP arriving in July and August, primarily from Morocco, up by 33pc from the same period in 2016. But the influx has not weighed on barge prices as minimal imported barges have been actively offered, with importers instead choosing to use them to refill empty warehouses.

The long planting season drove early expectations for limited farmer demand until late-October, following the corn and soybean harvests. But those sentiments have changed some with wheat prices for the 2018 new crop. The July Kansas City futures contract rose by 13pc since last year's fall planting season to $5.65/bushel, signaling the potential for strong demand during the fall wheat run. The anticipation of heavy demand during the fall wheat run has wholesalers in the Southern Plains accelerating their procurement timetables in order to have tons in place by first-half August.

But some market participants suggest that crop prices will falter prior to harvest, limiting farmer funds for crop inputs like phosphates. In addition to the reduction of crop prices, some farmers may alter their field preparation schedule to the spring in hopes for lower fertilizer prices.