Supply cuts from major global producers should stabilize US phosphate prices in early-2020, and price support is possible with increased demand in the spring.
Sentiment toward 2020 phosphate prices turned positive in late-December when Moroccan producer OCP — a main supplier of offshore phosphates — and North American producer Mosaic announced production cuts totaling approximately 350,000 t/month for early-2020.
Mosaic will shift its 150,000 t/month production curtailment from its Faustina, Louisiana, phosphate complex, to its central Florida facilities in early-2020, the producer said. The Florida curtailment will not begin until production resumes in Louisiana, meaning the company's total phosphate output is not expected to change from fourth-quarter 2019 levels.
At the same time, OCP is expected to reduce its output by 500,000t between mid-December and February, amounting to about 200,000 t/month, because of logistical challenges posed by poor weather at its Jorf Lasfar, Morocco, port.
Price recovery prior to spring applications remains unlikely amid bloated inventories — a carryover at the wholesale and retail level that is projected as the fall application season finishes below expectations — which market participants anticipate will prevent a traditional winter fill period. But production cuts should signal to buyers the market has hit the floor or approaching it in the near-term, boosting demand for product at this price level and likely stabilizing barge prices in January.
Three periods of lackluster applications pressured barge values down by over $150/st from late-2018 to $232/st fob Nola for DAP and $235/st fob Nola for MAP by 19 December, the lowest DAP price since 2006 and the lowest MAP price in Argus history.
The industry originally estimated farmers needed to apply 120pc of a typical fall this year to balance inventories after a poor spring, but applications are estimated to finish closer to 85pc of a normal year.
Continued production curtailments and a strong export line-up should help prevent additional product buildup in the first half of 2020 as buyers carry unused fall product into the spring.
Exports in January-October rose by 21pc to 3.3mn t from the same period in 2018, while exports for fertilizer year 2019-20 (July-October) rose by 28pc to 276,000t from 2018.
Combined DAP and MAP imports during the first half of the 2019-20 fertilizer year are estimated to fall by 10pc to 1.28mn t from the prior year after high first quarter imports left the US supply chain oversupplied during most of 2019.
Higher crop acreage in 2020 may also boost farmer demand for phosphates. Industry estimates peg corn acreage as high as 95mn acres in 2020, which would increase P2O5 consumption by 6pc to about 2.3mn st compared to the 2018-19 season, according to Argus estimates.
By Jasmine Davis
