Agriculture Market Update: H1 2024 in Review

What factors drove potash supply and demand in H1 2024?

Prices for potash were rangebound through the first half of 2024.

The year started with little change from December 2023 falling slightly to US$296.25 per metric ton from US$311.88 per metric ton. The slide continued in February dropping to its year-to-date low US$289.38 per metric ton before rebounding to US$300.50 in March.

The second quarter saw upward momentum continuing, with the price climbing to US$305 in April and US$307 in May. Prices for potash saw their year-to-date high of US$310 in June before retreating to US$300.63 in July.

Potash prices are at a 40-month low and are part of a long-term trend that has seen declines since hitting a record of US$1,202 in April of 2022 which came as supply chains tightened following the start of Russia’s incursion into Ukraine.

In an email to the Investing News Network, Josh Linville, vice president of fertilizer at StoneX, explained that while the market is well supplied, the threat of a rail strike in Canada could change that.

The threat of a stoppage has been looming since February, when negotiations between Teamsters Canada and the country’s two largest rail operators, Canadian National Railroad (TSX:CNR,NYSE:CNI) and Canadian Pacific Kansas City (TSX:CP,NYSE:CP) broke down over safety provisions in collective agreements.

Although there has been little movement in negotiations, a strike has so far been averted when the union’s right to strike was suspended when the government stepped in to determine if shipments must continue during a work stoppage. The union reaffirmed its strike position on June 29, and has 60 days from that time to strike or it must hold another vote.

“Fortunately for their logistics and the global potash market, these strikes have not resulted in a work stoppage yet. While a short-term stoppage would likely have little impact on the markets, a longer, drawn-out one could set the world into a ‘catch-up’ mode,” Linville said.

Strike action could be potentially damaging as Canada continues to dominate the potash market. Exports during the first half of 2024 ranged between 1.8 and 2.2 million metric tons.

What factors drove phosphate supply and demand in H1 2024?

Although both potash and phosphate prices hit record highs in 2022, phosphate has remained elevated in comparison. It opened the year trading at US$596.25 per metric ton in January and saw a slight decline to US$596.25 in February, before rising to US$617.50

The second quarter saw the price retreat with April prices falling to US$545 per metric ton and US$522 in May. The price ended the quarter at US$543 in June before falling again to US$539.40 in July.

The first half of the year was defined by continued high pricing in the phosphate market. The hope was that exports from China would return to normal following export restrictions imposed in 2021 that were designed to ensure adequate supply of critical materials including phosphate.

China, which controls 30 percent of the world’s supply of phosphates, implemented a quota system in 2022 that would further restrict phosphate exports to 3 million metric tons per year, down from the 10 million metric tons it had previously been supplying.

Earlier this year there seemed to be some reprieve when China said it would increase the quota to 7 million metric tons, however by the end of the second half the opposite occurred and exports from the country fell off.

“Phosphate markets have remained extremely high priced for all of 2024. There was hope as Chinese exports (historically the global leader) started to reach normal paces thru May. Unfortunately, June and it sounds like most of July will see those exports restricted, causing the global market to see supplies tighten,” Linville said.

This is coming against shrinking stockpiles in India, which is the largest consumer of phosphate. The purchase of fertilizers is subsidized by the Indian government, but as prices for phosphate remain elevated purchasers are still losing money on imports. A change in how those subsidies work could further drive market prices.

“The largest fear going forward is that Chinese exports remain restricted and India changes their subsidy program and plays a huge role in purchasing product. None of this touches on the tight supply situation in North America as the result of a huge fall 2023 and spring 2024 run and duties continuing to block 3 of the 5 largest exporters in the world (Russia, China, and Morocco),” Linville said.

Through the second half of the year, the situation doesn’t look to be easing. Linville explained that prices are high in comparison to grain values, with the price of fertilizer compared to corn being their worst since 2018. He believes this should help to provide some relief on the demand front, but he also doesn’t think it will be enough to bring prices down.

“If China completely removes itself from the export market (much like they have done with urea), global values are not likely done increasing. The same can be said if India starts to purchase huge volumes to build domestic stockpiles. On the other hand, China could easily let loose exporters and see volumes increase rapidly, taking price ideas lower with it,” he said.