Global Fertilizer Outlook - 3

OMAHA (DTN) -- Much like the phosphorous outlook, the look ahead for the global potash (K) market looks to be positive in 2024, thanks to lower prices and returning demand from farmers across the world. Better affordability will mean more potash applications in 2024.

However, the Russia-Ukraine war affected potash supply in the last couple of years and the war in the Middle East could affect supply again in the global fertilizer market. Low river conditions on the Mississippi River could have some negative effects on the outlook this winter in the United States.

REBOUND IN WORLD FERTILIZER

According to the International Fertilizer Association (IFA), consumption of fertilizers worldwide is expected to recover by 4% in 2023 to 192.5 million metric tons (mmt). A record level of 200.2 mmt of fertilizer was used in 2020.

Global potassium chloride -- potash -- production is estimated to have declined by 15% to 62.1 mmt compared to 2021, according to IFA. The years 2020 and 2021 were peak years for potash supply and, when comparing to 2019 levels, production in 2022 was 6% lower.

IFA reported lower fertilizer affordability is the main factor behind the drop in fertilizer consumption between 2020 and 2022.

Demand destruction was greater for potash than for phosphorus fertilizer (produced from phosphate rock), and greater for phosphorus than nitrogen. Potash consumption dropped by 12% in 2022 versus 2020, compared to 9% for phosphorous and 5% for nitrogen, according to IFA.

Fertilizer consumption in recent years has fallen globally due to this same issue of affordability with the high price of nutrients. Rabobank estimates 2023 was a much calmer year than 2022 with global fertilizer usage up 3% in 2023 after a 7% decline in 2022.

The outlook for 2024 suggests potash application could increase to about 5%, according to Rabobank. With the fertilizer prices at lower levels and affordability more positive, the world's farmers are expected to increase sales into 2024.

POTASH SUPPLY

Potash was also affected by supply restrictions in 2022 from some of the main supplies affected by the war in Ukraine. Sanctions on global potash producer leader Belarus also had some effect on supply. Rabobank reports the sanctions cut Belarus' exports from 12.30 mmt in 2021 to 4.90 mmt in 2022.

The country found ways to get potash to world buyers, according to Samuel Taylor, Rabobank farm input analyst. This continued supply put pressure on potash prices in 2023, he said.

"They (Belarus) did get potash out by shipping some by rail eastward into China," Taylor told DTN.

Potash supply and demand found some balance in 2023 with prices relatively stable. Even with a drop in prices in 2023, demand remained quite slow with just a few countries remaining active in the market.

BELARUS IMPACT ON POTASH PRICES

News of Belarus returning to the world potash export market put downward pressure on the potash market in early 2023, he said. World potash prices fell more than 43% between January and September 2023.

Chris Lawson, head of fertilizers for London-based CRU Group located in New York, said the additional potash supply in 2023 helped to push prices lower. In addition to railing potash to China, Belarus continues to move product by both Lithuanian and Russian ports.

Belarus potash production before the war was 11 to 12 mmt a year and CRU estimates the country's production in 2023 to be about 7 mmt.

"Despite the sanctions, Belarus still seemed to get most of their potash out one way or another," Lawson said.

Taylor said this continued world production from Belarus is positive for potash prices.

Rabobank has a fertilizer price bias of neutral for potash for the next six months, Taylor said.

Lawson said he could see "modest pressure" for potash prices in 2024.

WAR RISK REAL

Unfortunately, yet another war could affect the potash market in 2024.

The Israel-Hamas war has the potential to be another risk to the global fertilizer market, according to Josh Linville, director of fertilizer for StoneX. Israel is the fourth largest potash producer in the world and an unstable situation there is not positive news, he said.

While the potash production in Israel is not located near the fighting in the Gaza Strip, the risk of potential regional conflict could be bad news to fertilizers. In addition to Israel's potash production, the countries of the Middle East produce 51% of the world fertilizer market's urea exports, he said.

"A regional conflict would lower fertilizer supply and create many issues," Linville said. "I tell folks all the time to be aware of these global events as they can change things dramatically."

LARGER SUPPLY OF POTASH

Linville said more potash supply could be a positive aspect of the potash market in 2024. With more potash mines opening in various locations across the world, the supply of the nutrient appears to be solid into the next year.

Rabobank reported there are even signs that the global potash market could approach an oversupply situation. World potash consumption is forecasted to be 44.3 mmt in 2024, while potash production is expected to be 42.9 mmt, according to Rabobank.

There is some thought Belarus could increase exports to as much as 7.8 mmt in 2023, about 3 mmt tons more than in 2022. The forecast is for 5% more potash use in 2023, with further usage increases expected in 2024.

Watch River Levels

MISSISSIPPI RIVER IMPACT

Mississippi River levels could have some influence on the potash market in the United States. Grain moves down the river system, but fertilizer moves up the river during winter to get to northern growing areas for spring application.

Matt Roberts, grain and oilseed analyst for Terrain Ag, told DTN the Mississippi River saw some recovery in water levels during November, but this issue is not going away and will remain something to watch for the coming months.

While water levels are still low, the various shipping restrictions on the system were lifted. Mississippi river system water levels usually fall during winter, so this issue will be hanging on for some time, Roberts noted.

Lower water levels could lead to fewer barges transporting fertilizer or less fertilizer per barge, he explained. "This of course means more transportation costs associated with fertilizer."

WINTER WEATHER FORECAST

The winter weather forecast does not appear to help the Mississippi River low water situation.

DTN Ag Meteorologist John Baranick said it will take a busy weather season this winter to alleviate this situation and this doesn't appear to be likely. The El Nino weather pattern generally splits the weather stream into more northern and southern areas, which is not going to help most of the river system, he said.

"Some moisture over the lower Mississippi River region might help water levels during the winter months, but considering a majority of the water is coming from the Ohio, Missouri and Upper Mississippi River areas, this probably is not going to help it much," Baranick said.

In the long term, the weather outlook appears to be a bit unknown heading into spring. Baranick said the outlook is for the weather pattern to change from El Nino to La Nina this spring.

La Nina tends to mean hot and dry weather on the Plains. There are a lot of questions about the spring outlook and right now not many answers, he said.

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EDITOR'S NOTE: This is the third and final story in the Global Fertilizer Outlook series.

Global Fertilizer Outlook -- 1 can be seen at: https://www.dtnpf.com/….

Global Fertilizer Outlook -- 2 can be seen at: https://www.dtnpf.com/….

Check out the weekly DTN Retail Fertilizer Trends column, along with the monthly DTN Fertilizer Outlook, at https://www.dtnpf.com/….

In addition to national averages, MyDTN subscribers can access the full DTN Fertilizer Index, which includes state averages, here: https://www.mydtn.com/….

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

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