World fertilizer demand is projected to rise this year, buoyed by a recovery in South Asia and in most other regions.
Record harvests in 2013 have put downward pressure on agricultural commodity prices, particularly corn and wheat. International fertilizer prices also declined last year. Influenced by declining crop futures, commercial farmers have been cautious about their fertilizer investments despite relatively favorable fertilizer-to-crop ratios. In this context, world fertilizer demand increased modestly in 2013 according to the International Fertilizer Industry Association (IFA).
One critical factor to watch out for is fertilizer subsidies – a principal driver of world fertilizer consumption. However, IFA’s Patrick Heffer and Michel Prud’homme note that changes in subsidy schemes are hard to predict. “Smallholders’ purchasing decisions are greatly influenced by the evolution of fertilizer subsidies, especially in developing Asia and Sub-Saharan Africa. Recent examples in India, Bangladesh and Malawi clearly illustrate the major impact of fertilizer subsidy policies on national, regional and global fertilizer demand.”
Heffer and Prud’homme project that with favorable weather conditions in all the major fertilizer markets, and a “progressive rebalancing” of fertilization practices in India, world fertilizer demand is expected to rebound by 2% in 2013/14 to 179.5 Mt nutrients. Global N demand would rise 1.8% to 109.6 Mt, with the rebound in South Asia accounting for half of the net increase. World demand for P is expected to expand 1.8% to 41.1 Mt, while K is seen up by 2.6% to 28.7 Mt.
By region, Heffer and Prud’homme expect total fertilizer demand to rise everywhere but North America and Western and Central Europe.
Looking ahead to 2014/15, IFA sees global fertilizer demand expanding by 2.7% to 184.3 Mt, with K demand growing fastest at 4.9%. The forecast, IFA notes, is still speculative and assumes a lack of major changes to ag market fundamentals, fertilizer subsidy rates in India and improving fertilizer use efficiency in China.