Global Fertilizer Prices

As prices for agricultural commodities increase, demand for fertilizer also rises as agricultural producers respond by increasing production.

Potential global fertilizer supply is constrained by the cost of raw materials, the capital requirements for new mines and manufacturing plants and development lead times. The combination of these factors means that if demand increases faster than anticipated the response in supply can lag leading to price spikes like the one experienced in 2008-09.

The fall in demand was equally quick as a result of the global financial crisis and of farmers reassessing the economics of fertilizer use at very high fertilizer prices and declining prices for agricultural commodities. As demand quickly dropped there was excess capacity and fertilizer prices fell.

The other significant influence on global fertilizer prices is the price of fossil fuels, in particular natural gas. Fossil fuels (and air) are the main input into nitrogen fertilizer production and changes in global prices for natural gas will be reflected in nitrogen fertilizer prices over time.


 

 

The three graphs above (as shown by www.potashcorp.com) illustrate the unusual peak in prices for major traded products DAP (phosphorus and nitrogen), Urea (nitrogen) and KCI (potassium) during 2008-9.