Phosphate Fertilizer Price Rally Faces Resistance
With Indian demand for phosphate fertilizers weak, Chinese export activity pressured the global markets sending the US Gulf reference price for DAP (diammonium phosphate) fertilizer tumbling in the fourth quarter of last year. This occurred, despite an apparent bottoming of Canadian potash export prices and a slight uptick in the global reference price for urea (nitrogen) fertilizers in the same period. The first weeks of January 2017 have started on a more positive note though, as prices have bounced (roughly 4%) following a reported reduction in Chinese exports. PhosAgro, one of the world’s largest phosphate fertilizer exporters, is confident that phosphate fertilizer prices will stabilize in 2017, as less-efficient Chinese production shutters. Stabilized prices perhaps, but a sustainable rally is another matter absent of a major recovery in global demand.
There's Beef in This Trade Spat:
While US corn and Mexican fruit & vegetable producers have justifiably been the focus of a potential trade reset between Mexico and the United States, it is important to note that US meat exports to Mexico outranked grains by export value in 2015. What’s more, the number of beef cattle in Mexico reached an all-time low during 2016. Given the decline in US export prices for beef, Mexican consumers have responded by increasing their imports of US beef on a seasonal basis. In light of the average 3-to-4 year expansion cycle for beef, Mexican meat lovers would feel the disruption of a trade tit-for-tat between Mexico and the United States. Granted the opening salvo of words has just been launched, but we would encourage readers to keep a close eye on weekly US beef and pork exports in Gro.
DDG Production Report Comes After Chinese Tariff Hike:
Earlier this month, China’s Ministry of Commerce increased its tariff and countervailing duties on dried distillers grains from the United States. The PRC has set the tariff at 53 to 66-percent for five years. China has been aggressively expanding its domestic capacity for ethanol production over the past year and had even introduced preliminary duties on dried distillers grains a year ago. Nevertheless, the country’s actions remove a growing export market that US biofuel producers had come to rely on in recent years. Although the USDA Grain Crushings and Co-Products Production report to be released on Wednesday will only capture US production of DDGs during December 2016, the report still bears watching. While Chinese policy action didn’t come out of the blue, the timing comes at a seasonally weak period for the US ethanol industry.