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bayestheo82
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Posts: 2
Joined: June 6th, 2017, 9:43 pm

How do numbers add up for the fertilizer market?

November 14th, 2017, 1:40 pm

With 7 billion people on the planet there are basic needs that need to be fulfilled, food is one of them, without it humans’ ability to do anything else is greatly diminished. Correct use of fertilizer at the appropriate time increases agriculture production, these advances in technology proved Malthus “dismal science” prediction wrong or at least temporarily by ensuring food production can meet the ever-increasing demand, especially from countries in the world where the middle class is expanding.
[justify]Exponential growth in population and the rise of the middle classes goes in hand with the demand for fertilizers by major food growers like China, India, US and Brazil as they aim to be self-sufficient to reduce their dependency on international food trade. A small change in the volatility of demand from any of these countries would have a big impact on global prices as the market tries to compensate. The same follows for the phosphate fertilizer market, the difference between supply and demand highlights Brazil and Canada as consumers without a robust infrastructure for exporting or as chronic importers. So, what? Well it makes them vulnerable to phosphate price hikes or increases in consumption.[/justify]

[justify]Potash and phosphate are interesting commodities, they are not abundant, and their extraction is limited to specific locations, however globally the quantity of potash exported is much higher than what is currently consumed, which could indicate the reason for a price drop in Potash, unlike phosphates where consumption greatly surpassed global exports. More than 70% of the world phosphate reserves are in Morocco, it is not surprising to see Morocco among the top world exporters capitalising on demand.[/justify]
[justify]China, India and the US don’t stay behind and smartly balance their huge requirements of phosphate fertilizers by investing in manufacturing plants to become self-sufficient and even supply the market rather than chronically rely on imports. Also, interesting to note Brazil has reserves of phosphate but does not exploit them as much, being the fourth biggest consumer worldwide, just relying on imports (3millon tonnes in 2014 and 2.7 million tonnes in 2015) would greatly prejudice their economy. It also presents a good opportunity for Peru, a stable and growing economy to manufacture and export phosphate fertilizers in the Americas.  [/justify]
[justify] [/justify]
[justify]Nitrogen as a fertilizer shows a strong demand correlation with the most populated countries in the world, showing their need to meet food requirements. It also shows how major global exporters are countries rich in natural gas, a key ingredient in the preparation of nitrogen fertilizer.[/justify]

[justify]Profitability for most top manufacturers by capacity (Yara, Agrium, CF, Uralkali, Potash Corp, Mosaic and ICL) contracted in 2016. As any other commodity, supply and demand dictates the prices, in this instance marginal producers have entered the market and produced nitrogen based fertilizers at a lower cost making the overall price for the commodity lower and taking away margins from what initially was a smaller number of manufacturers. Oversupply of potash fertilizer as it can be seen in chart 3 above also causes prices of the commodity to drop, even if the material required is scarce.[/justify]
[justify]A negative correlation between the amount supplied by top global manufacturers and the amount consumed predicts a long term decrease in price for Potash fertilizers, and an increase in price for phosphate and nitrogen based fertilizers as the supply balances to match consumption.  [/justify]
[justify]Chart 4 depicting the profitability (return) and volatility (risk) of the top seven global suppliers in the fertilizer market shows Agrium and Yara as the most profitable and stable companies, it is important to note that both companies have a high ratio of nitrogen products in their portfolio. It also explains why Potash Corp a bigger company by capacity but with a low portfolio of nitrogen products will want to merge with Agrium.[/justify]

[justify]To sum up[/justify]
[justify]Demand for fertilizers by major food growers like China, India, US and Brazil goes in hand with the population growth and the rise of the middle classes  [/justify]
[justify][font=Times New Roman] [/font]A small change in the volatility of demand from any of these countries would have a big impact on global prices.[/justify]
[justify]Worldwide Brazil and Canada are vulnerable to phosphate price hikes or increases in consumption.[/justify]
[justify]Brazil one of the few countries with phosphate reserves does not exploit them as much, being the fourth biggest consumer worldwide, just relying on imports is greatly prejudicing their economy. It also presents a good opportunity for Peru, a stable and growing economy to manufacture and export phosphate fertilizers in the Americas. [/justify]
[justify]To meet global requirements for nitrogen fertilizer, countries who don’t consume nitrogen are major global exporters due to their rich reserves in natural gas, Russia, Qatar and Saudi Arabia.[/justify]
[justify]The top current market players are companies with a heavy portfolio on nitrogen products like Yara and Agrium.[/justify]

Joseph Bradford


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Data extracted from IFADATA https://fertilizer-statistics.org/
Data from Yahoo finance.
 
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ppauper
Posts: 64572
Joined: November 15th, 2001, 1:29 pm

Re: How do numbers add up for the fertilizer market?

November 14th, 2017, 6:09 pm

is there a point? what are you looking for from us?
 
bayestheo82
Topic Author
Posts: 2
Joined: June 6th, 2017, 9:43 pm

Re: How do numbers add up for the fertilizer market?

November 14th, 2017, 6:54 pm

ppauper wrote:
is there a point? what are you looking for from us?

Just some comments on what for me are unusual findings.
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