Resistance to further potash price hikes mounts

10 September 2008 11:42  [Source: ICIS news]

LONDON (ICIS news)--Growing resistance to further muriate of potash (MOP) price increases has been reported as crop prices fail to keep pace with the rising cost of fertilizer, market sources said on Wednesday.

 

Despite not ruling out a granular MOP price increase during September, a source at German producer K+S accepted there was growing resistance to continued price rises.

 

No increase was tabled at all in August, or so far in September.

 

“In the past we have done high and fast increases and on the other side the prices that farmers are getting for their products are falling a bit these days, so it is only natural that the farmers might resist even higher prices,” said the company source.

 

“Our customers are never satisfied when we come with price increases but in the past it was not that difficult to get the price increase through but this might get more difficult in the future,” added the source.

 

A UK trader/distributor confirmed this situation and said buying interest for potash and phosphates had fallen due to the price hikes.

 

Fertilizer made up a large part of farmer input costs, which cannot be suitably covered by the current sale price of crops such as barley and wheat.

 

There are also signs this trend is being mirrored outside Europe. One major Brazilian buyer recently said the $1,000/tonne CFR level targeted by one of its suppliers was unacceptable. As a result a reduced quantity would be delivered in September.

 

At the World Fertilizer Conference in Seattle, a different Brazilian buyer said it felt potash prices had peaked and were unlikely to go higher despite the PotashCorp strike in Canada.

  

Also reports from Pakistan suggested that April-July potash sales to farmers were down around 20% compared to the same period in 2007 due to a fall in demand on the back of rising prices.

 

Despite this, MOP remains in tight supply globally, particularly in light of the PotashCorp situation. As a result, further MOP increases cannot be ruled out.

 

Despite the current lack of price increases for granular MOP, K+S did say it would look to bring its standard MOP prices more in line with its granular MOP, up from around €540/tonne CIF/CFR in the third quarter to above €600/tonne CIF/CFR in the fourth quarter.

 

MOP prices have risen dramatically this year on the back of an in imbalance in supply and demand.

 

($1 = €0.71)

 

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By: Carl Roache
+44 20 8652 3214

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