Nice article in London's FT below Also note in the last month...

Nice article in London's FT below

Also note in the last month alone:
Cocao is up 2.5%
Coffee 12.7%
Sugar 13.6%
Rough rice 3.6%
Oats 7.4%
Soybean 7.7%
Wheat 18%
Corn 18.5%


The fertiliser industry has seen an astonishing turnaround in its fortunes over the past year.
The beginning of the Covid-19 crisis last year marked the bottom of what had been a nine-year funk in prices and profits.
But then something happened, or, rather, a combination of favourable trends.

Perpetually credit-hungry farmers got expansive monetary policy, governments hastened to ensure food supplies would be secured, and consumers jammed their home shelves.

With farmers’ incomes rising in most of the world, they had the cash to spend on more fertiliser applications, sometimes on more marginal land.
And there was a return of La Niña, a Pacific weather phenomenon.

This leads to more rainfall in some areas and less in others but overall seems to boost fertiliser demand and prices.

Mosaic, the largest US-headquartered fertiliser company by market capitalisation, had been struggling with plant closures, leverage and the costs of digesting a Brazilian acquisition. Its shares were down to $9.59 in March last year. Now they are more than $36.

More conservative competitors, such as Yara International of Norway, or Nutrien, from Saskatchewan, Canada, have seen share prices rise by about a third.

The producers’ profit increases have been accelerating since the beginning of this year.

The boomlet is even benefiting the industry’s independent analysts. Consulting firms are bidding for the available talent. Even better, as one says: “People would kind of laugh when I said I was a fertiliser analyst. Now we’re getting all sorts of calls, particularly since the beginning of the year.

Investors are really interested.” As always with commodities producers, the question is how long the good times last, and who will survive and take share throughout the coming cycle.

The generic term “fertiliser industry” actually refers to three different crop-yield-enriching elements: nitrogen, phosphorus and potassium, or “NPK”.

Nitrogen compounds, mostly urea, have the largest volume and are the most frequently applied, followed by phosphorus in the form of phosphates, and potassium in the form of potash.

Nitrogen compounds are the most widely produced and have the most competitive pricing. Potash market analysts describe the fertiliser’s pricing pattern as being “cartel like”. And, indeed, Canadian exports are handled by the Canpotex monopoly, which sells the Saskatchewan potash output of Nutrien and Mosaic.

Up until 2013, Canpotex appeared to co-ordinate price-setting with Russian and Belarusian producers.

Potash profit margins are generally higher than those of other fertilisers. Fertiliser companies usually start out with an endowment of a low-cost form of one of these elements, and use the profits from their original advantage to build access to the other two minerals and international markets.

For example, Yara started by using cheap Norwegian hydro power to make nitrogen fertiliser; one of Nutrien’s predecessor companies began with a large, low-cost potash deposit in Saskatchewan; and Mosaic’s predecessor company had access to a Florida phosphate deposit and the American market.

Other entrants have followed this path. EuroChem and Phosagro acquired Russian phosphate and potash in post-Soviet times, along with access to cheap nitrogen from Russian gas.

OCP in Morocco has huge phosphate deposits, and has diversified upstream and across Africa and Brazil.

Saudi Arabia has used its local phosphate deposits and cheap gas to create Ma’aden, which in turn partnered with Mosaic and Yara.
Of course the companies seek to use political power to advantage. Last year, for example, Mosaic successfully pushed for tariffs on Phosagro and OCP.
And, as with so many other industries, Chinese companies have a heavy influence on the marginal price of all the NPK fertilisers, which they produce mostly for domestic use.

China has its own phosphate mines, uses cheap coal to make nitrogen fertiliser, and is an importer of Canadian potash.

And Chinese demand for corn is accelerating as it rebuilds its swine herd, which was decimated by the African Swine Fever outbreak in 2018, according to a recent report from the consultancy CRU. “However, the swine-led rally is likely to recede once herd numbers have been restored and crop production in China responds,” it says.