Producers May Face Difficult Fertilizer Decisions This Fall

Tensions in the Middle East have raised significant concerns about the price and availability of fertilizers and fertilizer inputs in recent weeks.  Josh Linville, vice president of fertilizer for StoneX, said a lot of fertilizer input production shut down during the fighting between Iran and Israel.

“We spend a lot of time talking about the Middle East, its importance to the nitrogen marketplace globally, and this fight between Israel and Iran had a very direct relationship to the urea market," Linville said.  "So, looking at 2024 numbers, Israel was the third-largest exporter in the world for urea. Well, Iran, as a precautionary measure, had to shut down their gas fields, which means you shut down nitrogen production. On the flip side, Egypt was number four, and they had shut theirs down. A lot of people were like, ‘Well, they're far away from the fighting. Why does that matter?’ Well, Egypt relies on Israel for their gas, so they had to shut down their nitrogen production. So, when all this started to happen, and especially when Iran started talking about closing the Strait of Hormuz, prices went crazy. You know, we're talking 20, 40% rallies in these markets.”

Price Expectation

Linville said prices have remained elevated.

“We have, and all for different reasons. The nitrogen market, of course, had been falling. We were finally starting to see demand quiet down. Then the attack started, and that got everybody fired up," he said.  "Even with things calming down, we're not quite sure if we're going to get back down to the lows we were at. Unfortunately, in the middle of all this, India stepped up with another purchase tender, looking to secure two million tons of urea, so that's going to give the market a lot of action to work with. Phosphate continues to struggle with the lack of Chinese exports. Normally, they're the largest exporter at eight, nine, and ten million tons a year. The government is restricting that down to four million tons this year if we're lucky enough to get to that point.”

Linville pointed out the higher prices are affecting the potash market too.

“Even potash is significantly higher than where it was last year. Manufacturers did a masterful job of kind of framing the story out there, claiming things were tight. Demand was big, and there are certain aspects of that were true. But in the end, they got India and China to buy it at higher prices, and now the rest of the world is gonna have to do the same.”

Records Have Already Been Broken

Linville warned producers could face some difficult choices ahead for fall applications.

"Well, unfortunately, I think there's gonna be a very, very hard decision to be made regarding the fall phosphate and potash applications. When you look at the phosphate versus the corn pricing, of course, we look at the December 26 corn today, because any of the phosphate bought today to be applied in the fall spring is being used to raise next year's crop, and so we look at that relationship between the two of them, it’s the highest it's ever been for this time of year," Linville said.  "We have beaten the 2008 records that were set. If you look at potash, it's on the higher side. Not nearly as bad in comparison, but it's still high, and I think farmers are gonna have to sit there and look at it and decide how important is this?”

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