Fertilizer demand in Indo/Malay is dominated by one commodity and its not rice, its palm oil. The price of palm oil is now extremely correlated to the price of oil, due to marginal demand as biodiesel. Fertilizer makes up 40% of total costs for a palm oil producer and all of their raw material costs, the palm oil industry is basically turning fertilizer into oil. Since the price of crude/palm oil has collapsed, so has Indo/Malay demand for fertilizer. Most of the big plantations are giving their stressed out trees a break (not harvesting), but they still have very strong confidence in the long term demand story. In fact, there is massive investment going into palm oil and jatropha in SE Asia, which means additional future demand for fertilizer from 2010, 2011 when Wonarah come's online. There is only one caveat to this bullish outlook, that is high oil prices. CCI would probably struggle to sell rock phosphate in the next few months, but where do you think demand will be in a couple years?
AEV Price at posting:
40.7¢ Sentiment: None Disclosure: Held
