Fertilizer affordability falls from May on higher urea

Global fertilizer product affordability has weakened sharply over the past two months on lower crop prices and higher urea prices following supply restrictions at key producers in Egypt.

Nutrient affordability fell to 1.06 points in the first week of July, from an average of 1.24 points in May.

An affordability index above one indicates that fertilizers are more affordable, compared with the base year, which was set in 2004, while below one indicates lower nutrient affordability.

The decline in nutrient affordability over the past two months comes as farmers prepare to harvest grain crops in the northern hemisphere.

The fertilizer index ⁠— which includes international prices for urea, DAP and potash, adjusted by global usage ⁠— reached the highest value since March, mostly driven by a jump in urea prices, which weighs heavily on the fertilizer index owing to the relatively higher global usage when compared to DAP and potash.

Prices for urea surged from May into early July, supported by tight spot availability, as urea plants in Egypt were affected by gas supply constraints from mid-late May.

The unplanned urea plant shutdowns in Egypt caught the market by surprise and resulted in the Middle East benchmark rising by an average of 23pc since May, to $353.5/t fob on a midpoint basis in the first week of July.

But output at some urea plants in Egypt has started to resume from early this month following the restoration of natural gas supply, which should help to improve availability and provide some respite to overall supply tightness.

By Lili Minton

Affordability Index Regional