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WAR, VOLATILE ENERGY & TIGHT SUPPLIES, RATION FERTILIZER USE
TRADE & COMMODITIES War, volatile energy & tight supplies, ration fertilizer use
Fertilizer handling at the UK’s Port of Ipswich (photo: Helen McHenry).
The global economy faces steep challenges, shaped by the Russian war in Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and a slowdown in China. A third of the countries that make up the global economy are poised to contract. The International Monetary Fund growth forecast is lower at 2.7% for 2023. The largest economies, the US, China and the euro area will continue to stall. This year’s shocks added to lingering pandemic woes, the policy of zero tolerance as Covid cases in China rise prompting further shut-downs; for many people 2023 will feel like a recession. Rapidly rising prices, especially food and energy are causing serious hardship for all, especially the poor. Inflation pressures extend well beyond food and energy are more persistent peaking at 9.5% this year falling to 4.1% by 2024.
Global food and feed markets despite experiencing searing drought and floods, look to be supplied with large cereal and record oilseed crops projected at 3.39bn/t in 2022/23. Russia’s war in Ukraine has created great uncertainty shifting prices higher threatening food security, as global stocks especially for wheat and corn are at historic lows. Agricultural prices have eased although not because production will improve significantly, more due to weaker demand. Since July, the Black Sea Grain Initiative, provided scope for Ukraine to export 9mt (million tonnes) of grains and oilseeds. On 17 November, the agreement was extended for a further 120 days from 19 November.
Maria Cappuccio
FOOD, FARMING TO BECOME MORE SUSTAINABLE The theme for the UN’s Food and
Santos welcomes largest-ever fertilizer vessel
The Port of Santos has handled its largest ever fertilizer vessel. The Red Marlin, which is 229 metres long, had arrived from the Port of Huanghua, China, with 82,500 tonnes of ammonium sulphate on board.
The consignment of fertilizer once off-loaded at the terminal, was sent by rail to Brazil’s West-Central zone, which is the largest production area for soybeans and corn.
Wilson Sons, the vessel’s charterer, notes that there has been an increase in the volume of fertilizer being moved in Brazilian ports this year. Barry Cross
Agricultural Organisation (FAO) World Food Day, “Safe food today for a healthy tomorrow” highlights the way to improve long-term health benefits for people, the planet and the economy. While, enough food is produced to feed the world, wellover 800m people go hungry. There are several contributory factors, not least the impact of war in Ukraine, the energy crisis, changing climate as farmers find their sources of income and food are at risk from unpredictable downpours and droughts. At the November COP27 climate talks in Egypt, FAO’s Deputy Director Zitouni Ould-Dada confirmed, the FAO will launch a plan to show how together the food industry and farming can become more sustainable with the goal of capping global warming at 1.5° Celsius. He hoped this would spur investment into companies, projects and technologies aligned with the plan.
FERTILIZER USE EXPECTED TO RECOVER IN 2024
Demand for fertilizers remains driven by solid fundamentals, though market conditions vary between regions and crops. While global grain prices so far remain supportive, surging input costs and disrupted supplies have significantly impacted the availability and affordability of crop nutrients, and lowered fertilizer application rates, some regions seeing a pronounced slowdown in buying. Earlier in the year the International Fertilizer Association (IFA) included preliminary estimates for each nutrient for the five years to 2026. In the table below the IFA’s min/max range is used, with fertilizer use expected to recover until after 2024.
FARMERS SECURE FERTILIZERS IN ADVANCE Given ongoing risks of nitrogen shortages in Europe and price spikes during winter, should natural gas availability deteriorate, some farmers took advantage of a dip in prices to secure part of their fertilizer
needs for spring 2023. The FAO calculate the global agricultural input bill to reach $424/bn in 2022 a near 50% increase on last year. The sharp increase is almost entirely due to soaring cost of inputs and disrupted food supply chains while growth in imports remains subdued.
FERTILIZER PRICES EASE BUT WELL ABOVE HISTORICAL NORMS Yara confirmed it has reopened facilities and operating at 65% of its European ammonia capacity. This came after the company cut output to just over one-third of its total capacity for much of the second half of 2022. The move is in sync with other European fertilizer producers as European natural gas prices have fallen sharply in recent weeks due in part to milder temperatures and fuller-than-average gas storage facilities. European fertilizer output is about 63% of total capacity compared to 37% at the beginning of October. CF Industries believes producers in Europe and Asia will continue to face high energy costs into at least 2025, that will continue to challenge producer economics in those regions. Natural gas prices are still much higher than before the war in Ukraine, which threatens to keep a lid on production for some time, according to Chris Lawson, head of fertilizers at CRU. “We’re back to (price) levels seen at the same time last year, but they’re still well above historical norms.”
DAP PRICES FELL BY 11% IN THE THIRD QUARTER DAP prices have been supported by rising input costs, especially ammonia, due to natural gas prices. Some countries like Brazil experienced strong phosphate demand to support soybean acreage and in India to boost low fertilizer stocks. Higher prices softened demand and the war in Ukraine induced a substantial reduction in the acreage planted. China accounts for 30% of global trade in DAP, the decision to impose export restrictions has had a material effect on supply. China’s DAP exports fell 55% during the first eight months of this year. Following large gains earlier in the year DAP prices are projected to fall in 2023 and 2024.
MOP contract prices remained unchanged in the third quarter having risen earlier in the year. Spot prices retreated due to lacklustre demand, notably in North America. The market remains tight due to reduced supply from Belarus — with exports cut by 40–60% and Russia by 20–25%, together they account for around two-fifths of global potash exports. Following the Russian war in Ukraine, fertilizer exports from Belarus were blocked from global markets, as sea, rail transit through EU countries, was denied. The Russian fertilizer industry is not subject to sanctions, but logistical issues limits exports from Russian ports. Robust fundamentals are expected to support increased potash consumption in 2023.
US WHEAT, CORN ACREAGE TO RISE AT THE EXPENSE OF SOYBEANS IN 2023/24 Preliminary forecasts for US plantings, indicate soyabeans are expected to give up acreage to corn and wheat in 2023/24. US farmers are expected to expand the area for corn plantings to 92m/acres — with production pegged at c.387mt (15.265bn/bu) on average yields of 181.5/bpa; for wheat the increase in area is expanded to 47.5m/acres on average yield of 49.2/bpa with wheat production pegged at c.52.8mt.
Wheat continues to be acutely affected by the Russian war in Ukraine-Rabobank sees a 6mt deficit for wheat next year due to uncertain weather prospects in the EU, US and Argentina.
TIGHT GRAIN INVENTORIES IN 2022/23 Persistent drought conditions in northern hemisphere countries have prompted a significant cutback to the global wheat crop recently estimated at 783mt in 2022/23 marginally higher than last year due mainly to better crops in Russia and Canada; partially offset by smaller and poorly rated crops in the US 45mt, EU135mt and Ukraine where the crop was reduced by over 12mt to 20mt due to the war. The Rosario Board of Trade has further downgraded the Argentine wheat crop to 11.8mt (USDA 15.5mt) after frosts compounded the drought, further decreasing yields with only 8 per cent of the crop in good to excellent quality. While Australia yields are strong, heavy rains, flooding have increased the risk of quality losses in eastern areas.
1961/2–2025/26 mt nutrients Year Nitrogen Phosphate Potash Total 1961/2 11.6 10.9 8.7 31.2 1970/1 31.8 21.1 16.4 69.3 1980/1 60.8 31.7 24.2 116.7 1990/1 77.6 36.0 24.6 137.8 2000/1 81.2 32.5 21.9 135.6 2001/2 82.9 33.4 23.0 139.3 2002/3 85.1 34.1 24.7 143.9 2003/4 87.1 35.2 25.5 147.8 2004/5 90.2 37.5 25.6 154.7 2005/6 93.2 37.0 26.3 156.5 2006/7 97.4 38.1 26.9 162.4 2007/8 100.5 38.4 28.9 167.9 2008/9 97.7 33.7 23.4 154.8 2009/10 102.2 37.6 23.7 163.5 2010/11 104.1 40.6 27.5 172.3 2011/12 107.9 41.4 28.0 177.2 2012/13 108.6 41.4 29.2 179.1 2013/14 109.9 40.5 30.4 180.7 2014/15 110.3 41.1 32.0 183.4 2015/16 108.0 41.0 32.0 181.0 2016/17 107.7 46.0 35.3 189.1 2017/18 107.9 46.7 36.9 191.5 2018/19 105.6 45.5 37.1 188.2 2019/20 108.2 46.5 37.0 191.7 2020/21 113.7 49.7 40.4 203.8 2021/22 113.5 48.5 38.6 200.6 2022/23e 106.6-112.0 45.6-49.0 34.6-40.0 186.8-201.0 2023/24e 108.0-114.0 46.0-51.0 35.0-42.0 189.0-207.0 2026/27e 110.0-116.0 47.6-52.0 37.0-43.1 194.6-211.1
Source: FAO, IFA
GLOBAL WHEAT STOCKS TIGHTEST IN YEARS 2022/23
Less food, feed and industrial use reduced global wheat consumption to 791mt; trade rose by 2mt to 207mt on better exports from Canada.
Global wheat stocks of 124mt
Urea
Baltic Persian Gulf US Gulf
2018 2019 2020 2021 2022 Oct Wk2 Oct Wk2 Oct Wk2 Oct Wk2 Oct Wk3 $ $ $ $ $
260 237.8 245 418.8 678 320 255-257 270 800 678 350–296 230.5 240 700 —
Ammonia
Yuzhny
320–322 225-230 220 700 — Tampa CFR 330 255 228 558 1,175 Middle East 359–369 — — 1,200
Ammonium sulphate — — —
FSU 118 — — — — Asia 142.50 114 126 — —
Di-ammonium phosphate
North Africa 409 — — — — US Gulf 421.50 271-280 360 727 752 China 414 310-316 357 — 514 Baltic 426 304 340 — 731
Triple super phosphate
North Africa 358 313 — — — US Gulf 346 270 290 618 708
Muriate of Potash
Baltic 290 190 220* Vancouver 215.5 265.5 245 230* 562.50 US Gulf 268 280 202 740
Source Bloomberg, Farm Futures, Fertilizer Week, Fertilizer Market Bulletin, Profercy *Contract prices
(excluding China 144mt) are heading towards the tightest grain inventories in years on reduced harvests and stocks in the major exporting countries; elevated prices are forecast to persist. CBOT Futures Dec Contract for Wheat closed up at 8.476$/bu (4 Nov ‘22). Spot prices of Argentine Grade 2 wheat (Up River) $413/t, EU France Grade 1, Rouen $337/t and US HRW (Gulf) $427/t. (3 Nov ‘22).
LOWER OUTPUT, RISING PRICES CUT COARSE GRAIN USAGE Coarse grain output is forecast lower in 2022/23 at 1.46bn/t. This is mostly due to hot, dry weather, which curbed yield prospects and lowered output for US corn by 34mt to 364mt. Severe drought affected a number of other countries including the EU where corn output fell to 55mt. Reports in Ukraine indicate 10% of planted corn areas may not be harvested with output c.25.8mt (USDA 31.5mt) as farmers face fuel/storage shortages. With reduced global supplies of coarse grains and rising prices demand for feed/food/industry fell to 1,468mt in 2022/23. The drop in output further tightened already low global coarse grain stocks of 119mt (excluding China 207mt).
CORN SPOT AND FUTURES FIRM South Korea’s Major Feedmill Group (MFG) purchased 134,000mt of corn at $330-$331/t for arrival in February ’23; the Korean Feed Association (KFA) bought 65,000/t of corn in a private deal priced at $332.45/t plus $1.50/t for additional port discharges. Ukraine’s grain exports have resumed, with FOB basis $2.50/bu below US Gulf origin. Slow US corn exports due to a strong dollar, while challenging Mississippi River conditions, hampered grain deliveries and raised freight rates. US domestic values have held-up due to strong domestic demand for ethanol and feed. CBOT Corn Dec ‘22 closed up at US $6.80/bu (4 Nov ‘22).
RECORD-HIGH GLOBAL OILSEEDS IN 2022/23
Global production of major oilseeds is forecast to rise to a record 646mt in 2022/23, mostly driven by soybeans 391mt, with US output 118mt and potentially large growing crops under way in Brazil 152mt and Argentina 50mt. For other oilseeds, gains are noted for rapeseed 85mt following a recovery in Canada, cottonseed 42mt, palm kernel 21mt, with groundnuts 50mt and copra 6mt unchanged. Lower output for sunflower seed 52mt, due to the war, Ukraine’s sunflower seed crop fell by 7mt to 10.5mt. The protracted drought in Argentina, linked to a third straight La Nina climate pattern has significantly reduced soil moisture and poses a threat for soybean output.
BRAZIL’S FUTURE PRESIDENT TO PROTECT THE AMAZON The main road to Brazil’s Paranagua port for exports, was blocked by demonstrators protesting against the country’s election results after Luiz Inacio Lula da Silva defeated Jair Bolsonaro to become the next President of Brazil on 1 January. Following his win, he announced that “Brazil is ready to resume its leading role in the fight against the climate crisis, protecting all our biomes, especially the Amazon forest.”
CHINA’S COVID CURBS RATTLES MARKETS Soybean markets fell on concerns about slowing demand in China, where trade contracted as the country struggles with Covid curbs. Phin Ziebell, agribusiness economist at National Australia Bank summed up the mood, “There are big questions about the end of Covid-zero
GLOBAL CEREALS & OILSEEDS-PRODUCTION, USE & STOCKS 2021/22–2022/23MT
Wheat Coarse grains Sub-total Rice
Total
Oilseeds
Prod Prod Use Use Trade Trade Stocks Stocks 21/22 22/23 21/22 22/23 21/22 22/23 21/22 22/23
779 783 794 791 205 207 276 268 1,503 1,460 1,492 1,468 236 226 335 326 2,282 2,243 2,286 2,259 441 433 611 594 515 504 520 518 55 53 183 169
2,798 2,747 2,806 2,777 496 486 794 763
605 647 340* 353* 178 198 114 122
policy and seemingly few answers.” The Chinese government indicated it is sticking to Zero Covid, while easing some restrictions as it grapples with higher infection rates in Beijing and other major cities.
CHALLENGES FOR CROP OUTPUT AND FOOD SECURITY ISSUES Since last month the major exporters’ bids were little changed, the exception being the US bids increased as low water levels in the Mississippi River, negatively impacted grain deliveries. Prices spiked on news that Russia temporarily suspended its participation in the Black Sea Grain Initiative. Slack export demand, improvements in winter cropping weather and broadly favourable 2023/24 sowings have capped further rises and prices have since retreated. Grain and oilseed values reflect the surging costs of imported energy, labour, fertilizer and other costs behind the increase, that put a strain on low-income and lower middle-income countries resulting in lower agricultural productivity and food availability, likely to extend into 2023.
GLOBAL STOCKS-TO-USE AT 20-YEAR LOWS REMAIN PRESSURED Grain and oilseed markets are expected to remain tight through 2022 and 2023. The damage and disruption to Ukraine’s agricultural production caused by war, coupled with poor growing conditions in several major growing regions like the US, Europe, China and Argentina, have resulted in lower global agricultural production. This suggests that global stocks-to-use ratios, already projected at 20-year lows, will remain under pressure and are unlikely to recover in a single season. For this and others reasons most fertilizer producers see elevated crop prices in some regions supporting a return to more typical fertilizer applications in 2023.
SUPPLY AND USE FOR KEY FERTILIZERS IFA estimates for fertilizer supply and use for the three key nutrients Nitrogen, Potash and Phosphates, were adjusted following the war in Ukraine. Capability was based on the ability of Russia and Belarus to export amid sanctions imposed and logistic issues from Ukraine; Europe (west and central) was also adjusted based on disrupted natural gas supply from Russia and to take into account new plants coming on stream.
The IFA estimate for nitrogen in the table-reflect the min/max range for supply capability and fertilizer use.
STRONG FUNDAMENTALS DRIVE NITROGEN VALUES Nitrogen prices have strengthened significantly over the past year, driven by demand growth and supply limitations linked to Chinese exports, the war in Ukraine and sanctions. The tight supply environment remains challenging, primarily as a result of gas price volatility that prompted shut-downs by leading fertilizer producers, Yara and others have recently reopened their European facilities. Fertilizer inventories remain at historically low-levels; risks remain from nitrogen shortages and price spikes during winter, should natural gas availability deteriorate.
Globally, industry projections show new nitrogen capacity additions are expected to become operational between 2023–25. Following large increases this year, urea prices are projected to fall in 2023 and 2024 as new capacity comes online.
2018 2019 2020 2021 2022 Oct Oct Oct Oct Oct Wk2 Wk3 Wk3 Wk3 Wk3 $ $ $ $ $
US
Wheat No 2 HRW 237 213 279 363 432 Corn No 3 Yellow (Gulf) 167 174 230 267 369 Sorghum (Nola) 191 188 293 297* 376 Soybean No 2 (Gulf) 324 364 456 502 603
Brazil (Paranagua)
Soybean 416 380 500 521 601 Corn (feed) — — 233 274 295
Argentina (Up River)
Wheat 232 228 283 300 426 Corn (feed) 164 174 228 250 310 Soybean 397 356 456 545 594
Thailand
Rice White 5% broken 390 397 449 381 415 Vietnam Rice White 5% broken 407 353 477 428 424
India
Rice White 25% broken 340 330 342 361 364
Source: FAO IGC USDA—*Monthly average—Sept; Rice prices based on indicative quote
Fertilizer 2020/21 2021/22 2022/23 2023/24 2026/27 Nitrogen capacity 181.5 — — — — Nitrogen supply* 155.0* 159 150–160a 155–164a 159.8–169a Nitrogen demand 140.0 — — — — Fertilizer use 110.0 113.5 106.6–112 108–114 110–116 Other 32.6 — — — — N Balance 15.0 — — — —
Source: FAO/ IFA-data N/t basis * effective capacity derived a capability
Fertilizer 2020/21 2021/22 2022/23 2023/24 2026/27 Potash capacity 62.5 — — — — Potash supply 48.4* 52 41–49a 41.5–50a 42–51a Potash demand 42.1 — — — — Fertilizer 38.5 38.6 34.6–40 35–42 37–43.1 Potash balance 6.3 — — — —
POTASH MOST EXPOSED TO SUPPLY DISRUPTIONS The IFA expect potassium to be the most exposed nutrient to capacity disruptions as over 80% of forecast expansions are located in Russia. Large scale projects such as BHP’s Jansen mine in Saskatchewan, Canada is excluded from the IFA’s forecast as it is unlikely to become operational before 2026. The IFA estimate for potash in the table-reflect the min/max range for supply capability and fertilizer use.
INCREASED ACREAGE IN 2023 SUPPORTS POTASH Favourable weather conditions in North America, are expected to support normal application rates of potash and other crop protection products. South American spring crop planting is under way with a mix of planting conditions — Argentina continues to be impacted by La Niñarelated drought. By contrast, planting conditions in much of Brazil has generally been favourable-with soybean acreage expected to rise by 3–4%, with a proportional increase in safrinha corn acreage.
Due to sanctions, potash supply from Eastern Europe will continue to be constrained in 2023 — shipments from Belarus to fall by 40–60% and from Russia to fall by 15–30% to 2021. Nutrien expect robust agricultural fundamentals to support increased potash consumption in 2023 as inventories are drawn-down and prices stabilize with potash shipments forecast to rise 64–67mt in 2023 an increase of 4-5mt.
PHOSPHATE IMPROVES, SUPPLY ISSUES REMAIN The IFA forecast that of the three key nutrients, phosphates will be least exposed to capacity extensions in affected countries, because most of the new capacity in the next five years, will be located in Africa and East Asia, outside countries subject to sanctions. The IFA estimate for phosphates in the table reflect the min/max range for supply capability and fertilizer use.
TIGHT GLOBAL PHOSPHATE MARKET TO PERSIST IN 2023 Mosaic confirmed North America sentiment had improved significantly with phosphate application rates in the fall near normal levels, expected to deplete channel inventories. Fertilizer prices in Brazil remain historically high but have recently eased; while government subsidies in India are expected to remain at levels that support phosphate imports. China’s phosphate inventories are expected to fall, with exports cut by 5mt in 2022 — current export restrictions are likely to be extended into 2023. Mosaic forecast global phosphate shipments to rise to 72–76mt in 2023, depending on supply recovery with moderating prices expected to incentivize buyers.
Fertilizer 2020/21 2021/22 2022/23 2023/24 2026/27 Phosph’c acid capacity 59.1 — — — — Phosph’c acid supply 50.7* 51a 51–52.0a 51–55a 55–57a Phosph’c acid demand 48.8 — — — — Fertilizer 48.3 48.5 45.6–49 46–51 47.6–52 Phosph’c acid balance 1.9 — — — —
Source: FAO/IFA-Data P205 tonnes basis * effective capacity derived a capability
DCi
InterManager welcomes IMO commitment to address enclosed space risks
InterManager has welcomed a commitment by the International Maritime Organization (IMO) to review guidance governing safe working in enclosed spaces onboard ships.
Heralding the move as a significant step forward in crew safety, the association says it will work with the IMO, Flag States, and other maritime partners to ensure that lessons are learned from the many fatalities which have occurred in enclosed spaces and also, new legislation is workable and effective.
InterManager submitted a comment paper to the IMO’s Maritime Safety Committee (MSC) 106 meeting, cosponsored by a number of industry partners, in response to China’s proposal to revise IMO Resolution A.1050(27) which sets out recommend ations for entering enclosed spaces aboard ships. InterManager’s paper highlighted additional information which it believes should be considered and provided high level information relating to enclosed space incidents.
The ship and crew management trade body has been collating statistics on deaths and accidents in enclosed spaces since 1999 and reports that during this period, enclosed spaces have claimed the lives of 122 seafarers and 45 shore workers. However, InterManager Secretary General, Captain Szymanski, fears these figures could be higher still and says he believes there is under-reporting by shipping authorities.
“This is an opportunity for the shipping industry, led by the IMO, to comprehensively assess the dangers posed by the range of enclosed space and oxygendepleted areas onboard ships and to make meaningful recommendations which will remove or reduce risk, backed up by robust procedures that should aim to ensure no seafarer or shore worker dies while carrying out their jobs,” he said.
In its submission, InterManager and its co-sponsors recommend that the IMO Resolution A.1050(27) be considered by suitably competent sub-committees which should also consider emergency drills for enclosed spaces, the carriage of gas detection equipment on board ships, and MSC.1/Circ.1401 dealing with vessels inerted with nitrogen, plus the associated risks and hazards. It advises re-examination of previous submissions to address issues already raised, such as cargo hold gas monitoring, an appreciation of oxygen depleting cargoes, cargoes which are fumigated and cargoes which emit toxic gas.
It states: “The scope of the revision needs to be broad and comprehensive in order to take into account both the human element and ship design factors that have contributed to previous enclosed space incidents. This would undoubtedly mitigate against, and hopefully prevent, such incidents occurring in the future.”
The submission highlights a need to consider design of access as a means of reducing the number of such incidents, pointing out the risks posed by areas such as hold access ladders, specifically the enclosed trunk ladder (occasionally referred to as the ‘Australian Ladder’).
InterManager points out that previous submissions on enclosed space risks have discussed “the repetitive systemic nature of the enclosed space incidents” and this is a matter that InterManager has campaigned about, urging the shipping industry to delve deeper into accident investigations to look at the ‘why’ as well as the ‘how’. The submission draws attention to industry-led investigations into enclosed space accidents, commenting: “These reviews have resulted in the emergence of several distinct themes focussing on; design and construction, gas evolution, movement and entrapment within the ship structure, and the human element prevalent in many enclosed space incidents, such as the rush to rescue a single casualty resulting in the death of many, the disregard of procedures and local adaptation of unsafe practices. Likewise, it has been identified that in many cases ship and shore personnel are subject to time pressure which may result in them rushing or missing checks to meet artificial deadlines which often result in entry into spaces for which they are not fully prepared. These aspects have resulted in countless casualties where a known breach of procedure, (just a ‘quick look inside!’) in an enclosed space, has often ended in further loss of life.”
The submission states: “In order to reduce, indeed halt, such needless loss of life within the complexities and risks of the maritime world, the review of A.1050(27) needs to be comprehensive, in depth and as wide-ranging as possible in order to encapsulate the breadth of such studies. A new resolution on the recommendations for entry into enclosed spaces would go a long way towards avoiding the unnecessary deaths of seafarers and shore-workers.”
IMO MSC106 agreed that the MSC107 meeting, scheduled for June 2023, will draw up a plan for the revision of IMO resolution A 1050/27 in relation to Enclosed Space Entry Procedures. Responsibility for the output will be spear-headed by the CCC Sub-Committee, which next meets in September 2023, in association with five other IMO Sub-Committees, as and when requested by CCC, with a target completion year of 2024.
