Looking Ahead: Trends in Global Agricultural Markets
What will 2022 look like in terms of crop prices, input prices, demand, and supply of inputs? Taking a look at the key events and trends in global agricultural and fertilizer markets in 2021 can help to predict the direction of trends moving into the new year. Nutrien’s Market Research Manager Yao Yao and Senior Analyst Mark Tully gave us some insight on the market drivers to answer important questions as we prepare for the growing season ahead. Why is pricing high right now? What are the forces at play in the global supply and demand story?
What can we expect from crop prices in 2022?
“What a difference one year has really made to the industry as a whole. We’ve seen crop prices hit multi-year highs on below-trend production and rebounding demand in 2021. With that, we’ve seen some food price inflation in the marketplace,” explains Tully. “I think the market is doing its job to start to attract production into 2022 and hopefully alleviate some of these market dynamics that we’re seeing.”
Crop prices have improved significantly due to below trend global production and strong demand in China compared to recent years. Tully says the futures looking to 2022 are favorable and are expected to offer growers a decent return on investment in their crop this season. Global weather events in the 2021 growing season have created an increase in prices due to the lack of yield seen in many areas. For example, key Western Canadian row crops like canola and wheat have multi-year low stocks due to drought conditions and strong global demand, which are expected to support prices into 2022.
Where do input costs stand as we head into the planting season?
“Growers are going to have to make decisions that could be challenging,” says Tully. So, where is fertilizer economics and affordability for the grower at the moment? Tully explains, “It really does depend on the farm and the region the grower is in.” Fertilizer costs have increased to above-average levels, but it’s important to note that the cost remains below the average yield gain from applications. With an example of potash and phosphate costs applied to corn, there is still an incentive to that application, Tully says, that may apply to other crops and nutrients based on region.
Global Fertilizer Market Dynamics
Market Research Manager Yao Yao goes on to discuss the increase in NPK prices globally because of strong demand, supply disruptions, and higher input costs. In terms of global potash deliveries, the experts are predicting supply constraints to result in tight inventories of most major markets entering 2022. The previous year saw record demand of potash, with increased demand across North America. Limited new production from greenfield projects in 2021 was largely offset by reduced production from existing operations. Nutrien, however, was able to boost production of potash to meet strong demand for the year.
Yao explains the situation in Europe where record natural gas prices have contributed to plant shutdowns and reduced operating rates – in turn, increasing prices of all nitrogen products. The combination of export restrictions and higher coal prices could pressure Chinese urea production into 2022. “Increased DAP, MAP, and NPS imports from Australia, Saudi Arabia, Mexico, and Jordan offset much of the loss from Russia and Morocco, but MAP imports are down significantly year-over-year with DAP and NPS up significantly,” says Yao.
Overall, as we move further into 2022, while input prices are higher than average, crop prices continue to be above what we have seen over the last few years. Growers making decisions on inputs like fertilizer will have to determine the return on investment on making those choices. In many cases, the average yield gain from applications will outweigh the increased cost of inputs – talking to an agronomist can support you in making those critical decisions.
Nutrien’s Response and Outlook
Nutrien hopes that the conflict in Eastern Europe can be resolved without further loss of life or violence. While Nutrien has no operations in the region, we want to offer our deepest sympathy to any of our colleagues, suppliers, or customers who may have friends or family in the region, as well as to any members of the military that might be deployed to Europe at this time. This region is a key supplier of agriculture, energy and fertilizer products and further unrest or sanctions could impact global trade flows.
We cannot predict the specific impact that the conflict will have on our business but we are aware that it may mean diminished volumes of Potash, Nitrogen, and Phosphates for the global market at least in the short term. In 2021 we increased Potash production by almost 1 million tonnes in response to market demand, and we will increase production of Potash, Nitrogen, and Phosphates in 2022. We will continue to monitor the situation and do our part to ensure our customers get what they need.
