In the first part of the year China exported 140% more urea and looks set to export even more from July onwards.
This will put downward pressure on prices as demand is also limited because many regions are in their low season.
Rabobank says this will send both granular and prilled urea values to price levels that will come close to floor prices in the next few weeks.
Rumoured prices of around US $255/tonne FOB are making higher cost producers uncomfortable.
Production in the Ukraine, which is a higher cost urea producer, looks likely to contract as a result of low global prices and political instability. This is unlikely to have an impact on the balance of global supply and demand as Chinese volumes should cover any loss in Ukrainian volumes.
In the phosphate market, price caps in India are putting the global phosphate fertiliser market in a bearish mood.
DAP prices are capped at around US $480/t and a weakening rupee could lower this cap even further and make imports less affordable.
This, coupled with the growing likelihood of a disappointing monsoon due to a developing El Nino weather pattern, looks set to decrease demand for DAP even further.
While producers look to other markets to compensate for lower prices in India, Chinese volumes look likely to stymie any chance of achieving premiums in other regions.
In the US an increased demand for side-dressing and supply-chain filling ahead of autumn applications will not be enough to provide a significant lift to global fertiliser prices in the second quarter.
Bad weather shortened the window for pre-planting spring applications of fertiliser.
While application windows for fertiliser for rice, cotton, soy bean and corn, along with logistical bottlenecks did push upward pressure on nutrient prices for the first part of this year, this will not continue.
Rabobank predicts US demand will not dictate global fertiliser prices in the second quarter of this year.
According to the US Department of Agriculture, the area planted in corn and wheat is expected to fall by 4% and 1% respectively year-on-year, suggesting a further decrease in demand for nitrogen fertilisers – although an increase in rice and cotton plantings will offset this.
Rabobank forecasts demand for nitrogen fertiliser will decrease in the US by 1.5% year-on-year.
Demand for fertiliser is strong in Brazil on the back of strong increases in the price of coffee and favourable soy bean prices.
Rabobank says these factors increased demand for fertiliser by 9.9% in the first quarter of this year as farmers sought to increase crop yields.
Brazilian imports of fertiliser are expected to remain strong even though stocks are already high.
Price increases for potash in Brazil will potentially see potash producers using Brazil to help drive up prices in other markets such as Southeast Asia. What effect this will have on global potash prices is unclear.
There will be limited demand for phosphates in Europe during the second quarter of the year with spring applications having been completed. New buying activity will have come on stream by mid-July but prices are expected to remain soft.
