Positive Outlook for Fertilizer Demand in 2H 2023

by Warren Seah

CF Industries Holdings, Inc. management remains optimistic about the demand for fertilizer in the second half of 2023. The company expects a positive demand environment, fueled by several factors.

Low Inventories and Strong Demand from Brazil and India

Management believes that the Northern Hemisphere concluded the first half of 2023 with low stocks of nitrogen fertilizer. This, coupled with the anticipated strong demand from Brazil and India, is expected to support the overall demand in the second half of the year.

Challenges in Production Economics in Europe

While the outlook remains positive globally, CF Industries anticipates ongoing challenges in production economics in Europe. The declining global nitrogen prices make it difficult for European producers to compete with imports, despite the region experiencing a decline in natural gas prices.

Promising Farm Profitability in North America

Farm profitability in North America looks promising for the major crops planted during the 2023 spring application season. This positive outlook has led to significant increases in both corn and wheat plantings in the United States. CF Industries management attributes this trend to lower import levels, higher export volumes, and increased planted corn and wheat acreage compared to the previous year. As a result, the North American inventory position for all nitrogen products was below average at the end of the second quarter.

Brazil’s Urea Consumption

Additionally, CF Industries recognizes the importance of Brazil’s urea consumption in driving fertilizer demand. While details regarding Brazil’s urea consumption were not provided, it signifies the company’s awareness of this key market.

In conclusion, CF Industries Holdings, Inc. expects robust demand for fertilizer in the second half of 2023. Despite challenges in Europe’s production economics, they remain positive about the overall outlook due to strong demand from Brazil and India, promising farm profitability in North America, and the need to meet Brazil’s urea consumption.

Urea Consumption in Brazil in 2023

The company anticipates that urea consumption in Brazil will continue to be strong in 2023. This is due to the increase in corn planted acres and robust farm incomes. Furthermore, there is potential for higher import volumes in the second half of 2023. The favorable weather conditions are expected to encourage demand, especially considering the low inventories.

Global Nitrogen Prices

During the latter part of the second quarter of 2023, global nitrogen prices stabilized. This stabilization was a result of robust demand for the spring application season in North America. Additionally, smaller importing regions like Asia (excluding India) and Latin America (excluding Brazil) returned to their average purchasing patterns compared to 2022.

According to management, the Northern Hemisphere ended the first half of 2023 with low inventories of nitrogen fertilizer. Coupled with the expected strong demand from Brazil and India, this should create a positive demand environment for the second half of the year.

Long-term Outlook

Looking ahead, management believes that the global nitrogen supply-demand balance will remain positive. This is supported by resilient agriculture-led demand and forward energy curves indicating a steep cost curve.

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