BY RUSS QUINN
The outlook for nitrogen fertilizer appears to be positive as we move into 2024. Prices moved lower in 2023 with more supply returning to the market and nutrients became more affordable.
With these factors in place, the outlook for nitrogen looks to be stable with demand and supply both continuing to increase, along with somewhat stable prices.
However, there are wild cards that could change the outlook dramatically in the New Year. These include war in the Middle East, natural gas prices, crop prices and spring weather influencing farmers' planting decisions, and how farmers see affordability of fertilizer and other inputs.
REBOUND IN WORLD FERTILIZER
According to the International Fertilizer Association, consumption of fertilizers worldwide is expected to recover by 4% in 2023 to 192.5 million metric tons (mmt). A record level of 200.2 mmt of fertilizer was used in 2020.
Global ammonia production declined by an estimated 1% to 182.2 mmt in 2022, according to IFA. Lower fertilizer affordability is the main reason fertilizer consumption dropped between 2020 and 2022.
Fertilizer consumption in recent years fell globally because of the same issue -- the high price of nutrients affected affordability. Rabobank estimates 2023 was a much calmer year than 2022 with global fertilizer usage at a 3% increase in 2023 after a 7% decline in 2022.
The outlook for 2024 suggests an increase of near 5%, according to Rabobank. With lower fertilizer prices, the world's farmers are expected to increase purchases into 2024.
Rabobank estimates 2024 global nitrogen fertilizer consumption at 108 mmt. Nitrogen fertilizer production is pegged at 109 mmt. Global consumption is expected to rise through 2030, but with a modest 1.42% compounded annual growth rate (CAGR) from 2021 to 2030.
NITROGEN DEMAND QUESTIONS
There are some questions about nitrogen demand in 2023 and 2024. After falling 5.9% in 2022, nitrogen applications will increase 2% in 2023, according to Rabobank forecasts. This is below phosphorus and potash usage, which had increased use of 3.9% and 5.0%, respectively. P and K had been down since 2021, but farmers started to increase use again.
Rabobank said nitrogen applications in 2024 are forecast to rise 4%. The company's price outlook for the next four months into 2024 for nitrogen is upward compared to neutral for phosphorus and potash.
Samuel Taylor, Rabobank farm inputs analyst, told DTN the good news is nitrogen fertilizer is more affordable right now. Prices declined in 2023 and now prices are floating around historical averages for ammonia, UAN and urea.
This is especially true comparing today's prices with the same period in 2020 and 2021. These lower prices are also good news for nitrogen fertilizer demand.
"(Nitrogen) prices could be rangebound as we move into 2024 with no real big movements expected," Taylor said.
POSSIBLE MIDDLE EAST WAR IMPACT
One situation that could alter the relative calm in the nitrogen outlook into 2024 is the continuing war between Israel and Hamas and the effects a burgeoning conflict in the region would have on world fertilizer markets.
Roughly 51% of global urea exports come from the Middle East region, according to Josh Linville, director of fertilizers for StoneX. In addition, Israel is the world's fourth largest producer of potash fertilizer.
While the war is away from these fertilizer production regions, a growing war involving other neighboring countries would cause risk to the fertilizer supply. Hopefully this does not happen, but the possibility is there, Linville said.
"All it would take would be one errant rocket, so there is some risk with this situation," Linville said.
AMMONIA SUPPLY AND PRICES
When taking a closer look at the different forms of nitrogen, there appears to be more risk of higher prices when it comes to ammonia, said Chris Lawson, head of fertilizers for CRU Group, located in New York. Urea and UAN both appear to be well supplied into 2024; however, ammonia could see some supply issues, he said.
A new ammonia fertilizer facility was recently opened in the U.S. Gulf Coast region; this production is beginning to enter the global market, more so than into the North American market, he explained.
Natural gas is one of the base ingredients of ammonia fertilizer. The fact that the European market is still sensitive to natural gas prices could have negative effects on global ammonia prices. Lawson said last year Europe saw a mild winter, which meant natural gas prices were stable.
"Right now, European natural gas prices are low and there doesn't appear too much of a concern; but if we were to see cold temperatures this winter in Europe, this could be a concern with fertilizer prices there," Lawson said.
BATTLE FOR ACRES MATTERS
How many corn acres are planted in the U.S. in 2024 could also influence global fertilizer prices. Fewere corn acres means less demand for inputs such as fertilizer.
Matt Roberts, senior grain and oilseed analyst for Terrain Ag, said while it is still early, the battle for acres is occurring in the Corn Belt between corn and soybeans.
Most analysts believe more soybean acres will be planted in the spring of 2024, thanks to better margins for this crop. Roberts is quick to point out, however, corn margins are still positive.
Farmers could plant maybe a half million acres more of soybeans and around 1 million to 1.5 million fewer corn acres, Roberts estimated.
DTN Lead Analyst Todd Hultman said he believes farmers could shift even more acres to soybeans in 2024. Hultman believes corn acres could be at 91 million acres and soybeans at 87 million acres -- a change from 2023, which saw 94.9 million corn acres and 83.6 million soybean acres.
The profitability of corn acres remains a large question for many corn producers compared to soybeans in many areas of the Corn Belt, Hultman said. Beans acres are showing more profits currently.
"Some corn producers aren't profitable right now with corn and so we could see more acres shift to soybeans next spring," Hultman said.Click here to see more...