Viewpoint: Affordability may cap US MAP, DAP demand

Phosphate consumption concerns are poised to dampen the impact of previously supportive market fundamentals moving into 2022 as overall macronutrient affordability remains low.

Growers will likely prioritize nitrogen purchases next quarter as fertilizer affordability has steeply declined from May, according to Argus estimates, potentially pressuring spring phosphate applications below years prior.

Nola DAP and MAP values during the fourth quarter hovered at historical highs, with DAP barges at the most expensive level since the same period in 2008 and MAP prices the highest in Argus price history at about $725/short ton and $757.50/st fob Nola, respectively, by 23 December.

Record phosphate price appreciation occurred in tandem with higher key nitrogen and potash costs. Nola urea prices reached the highest since January 2008, and MOP barge values topped Argus series history at $685/st fob Nola by early December.

Resultant forward consumption concerns are already prompting hesitant purchasing by parties weary of carrying higher-priced inventory into an uncertain 2022 demand landscape, weighing on once overtly bullish sentiment as the fall application season ends — despite a still-tight mid-range supply outlook.

Further clarity on spring demand should follow year-end purchases, allowing retailers and wholesalers to better gauge upcoming farm demand. Reduced supply availability could neutralize the pricing impact of lower spring demand, with some industry participants estimating losses of up to 10pc of MAP and DAP demand, although it remains too early to tell.

On the supply side, Chinese and Russian export restrictions are still poised to tighten global availability slightly through the first quarter, boosting competition for imports and fueling fresh offshore supply concerns as US trade flows had only just adjusted to the loss of Russian and Moroccan cargoes. But higher prices are also depressing consumption outlooks across key global markets and threatening to halt supply-driven price appreciation that characterized the second half of 2021.

Argus estimates nearly 1.1mn metric tonnes of offshore DAP and MAP will arrive in the first half of the 2021-22 fertilizer year (July-June), a steep reversal from 2020 when import duties levied on Russian and Moroccan tonnage shocked domestic supply patterns.

But imported volumes remain well below levels from the same period in 2018 and 2019, and market participants anticipate a strong fall application season limited potential carryover. The US will still need to attract additional tonnage in the first quarter, and US Gulf coast MAP values lagged Brazilian values by nearly $28/t on a cfr equivalent basis in late December.

On the DAP side, recent US Gulf coast cfr values trailed India — where import demand prevails — by $103/t.

By Jasmine Davis