15 February 2011 18:17 [Source: ICIS news]
By Mike Nash
Why are fertilizer prices so strong?
First, commodity prices for corn and wheat are very bullish, so farmers can afford to pay up for agricultural inputs.
This is because food supply is tight, which is driving up demand for fertilizers in order to increase yield from limited land resources.
The future is certainly volatile, as Yara president and CEO Jorgen Ole Haslestad said.
“The significant swing from 2009 to 2010 underlines the short-term volatility in our business, but also shows that deliveries have rebounded quickly in the agricultural business as demand continued to grow robustly even through global economic slowdowns,” Haslestad said.
This last point is worth repeating: the fertilizer market went through the same catastrophic crash as every other market in 2009, when prices plummeted, resulting in many buyers left high and dry with high-priced inventory.
But the fundamentals have stayed firm throughout the economic downturn. Fertilizer demand is fuelled by population growth and demand for more and better quality food.
This is why there is so much interest in the financial performance of the major fertilizer producers and the exceptional level of speculation about how the supply side will shape up in the next few years.
For example, takeover and merger activity in the fertilizer industry – such as the recent speculation surrounding BHP Billiton’s attempts at a hostile takeover of PotashCorp, which eventually failed – has become mainstream news.
The test of Yara’s confidence in the market will be its plans to increase capacity in 2011.
Expanded capacity at the company’s Sluiskil urea plant in the
The short-term outlook for urea is bullish and Yara is well-placed to take advantage of this.
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections