NEW YORK: American fertiliser traders have seized on a lucrative opportunity overseas because of the war in Iran, showing how US farmers have been caught again on the wrong side of moves in global markets.
Domestic prices for phosphate fertilisers have lagged that of the international market, as American farmers struggling with high production costs pare back their use of the key crop nutrient applied widely to both corn and soy fields.
That has prompted some traders to move the product abroad to nations willing to pay up as the conflict in the Middle East ensnares global supply chains.
“US phosphate prices have not kept pace with the strength seen in other global markets,” creating an arbitrage opportunity out of New Orleans, said Taylor Eastman, a fertiliser trader at The Andersons Inc.
Since late February, traders have bought more than 100,000 short tonnes of phosphate fertiliser to be re-exported, he said.
The country had managed to import over half a million tonnes of diammonium phosphate – the most common type of phosphate fertiliser – from January through March, making up for months of depressed shipments and elevated prices due to the Trump administration’s reciprocal tariffs.
Now part of that quantity is set to flow abroad, adding stress to an already-tight domestic market.
The United States, while it makes most of its phosphate, does require some imports to meet demand.
The reversed trade flow comes as the price for re-exports of diammonium phosphate on March 13 climbed to the highest premium over New Orleans prices since June 2023, according to data from Bloomberg Green Markets.
While the US spot market, at around US$700 a short tonne as of March 27, has since reclaimed its premium, offers at those levels have still struggled to attract bids in the domestic market, said Chris Vlachopoulos, who covers phosphate markets for commodity pricing platform ICIS.
That suggests buyers are either done for the spring planting season or waiting for direction, and any April purchases are likely either for fall or the possibility of exports, he added.
Domestic demand has waned as farmers are expected to plant fewer fertiliser-intensive crops like corn this spring. Corn accounts for more than half of US phosphate fertiliser use, with soy accounting for roughly another quarter.
Other countries that are more dependent on imports have been offering higher premiums to attract supplies from a tightening global market.
China, the world’s biggest producer, had already been curbing shipments to protect its farmers, and disruptions to the Middle East are now threatening a significant share of global supplies for both phosphate and the sulfur needed to produce the fertiliser.
US shipments so far have gone to Latin America and to India, according to Guillermo Fernandez, a fertiliser price analyst at Bloomberg Green Markets.
Two vessels totaling about 60,000 tonnes, largely of diammonium phosphate, were likely sent to Latin America, he said.
Some traders are also holding onto large amounts of monoammonium phosphate, another form of phosphate fertiliser, also for potential re-export, he added.
Prices for diammonium phosphate have surged 21% in India since the war began, flipping from a discount to a premium over US prices, according to data from Bloomberg Green Markets.
Prices in Brazil for monoammonium phosphate are also outpacing the United States market.
Even as phosphate is largely in place for the spring, the exports increase the risk of even higher costs for farmers ahead of the next planting season, said Hunter Swisher, chief executive officer of fertiliser technology company Phospholutions.
The United States agriculture industry has continually urged the Trump administration to help with elevated fertiliser costs.
It last year sought an exemption from tariffs that was granted in November and is now pushing for the suspension of separate Commerce Department duties on supplies from Morocco and Russia, which are currently under review.
“Sending product abroad in a tight market only adds upward pressure on prices in an already high-cost input environment,” Swisher said.
“Phosphate prices have been elevated for several years, and farmers can only reduce or delay applications for so long before yields are impacted.” — Bloomberg
