Alberta nitrogen price update

Alberta Agriculture

Alberta retail prices for nitrogen fertilizer remained relatively quiet for much of 2020 as did global values.

‘These prices reflect the general softness in crop and natural gas feedstock prices,’ says Ryan Furtas, market analyst with Alberta Agriculture and Forestry.

‘However, in the second half of 2020, global urea prices began to increase due to stronger demand and higher input costs. The Alberta retail market for nitrogen did not begin to reflect this change in prices until December of 2020.’

There was a significant increase in grain prices during the late summer and early fall of 2020, which has fueled fertilizer demand and improved farm revenue. Aggressive Chinese purchases for corn and soybeans have supported a rally in agricultural commodity markets. Furtas adds year over year crop planting area is expected to rise as well as nutrient applications.

China is the world’s largest nitrogen producer and limited exports throughout much of 2020. In 2021, China could potentially reduce exports by an estimated 30% on a year over year basis.

‘Ongoing strong domestic demand, higher feedstock prices and more stringent environmental regulations are expected to reduce exportable supplies. World nitrogen demand that is usually provided from China had to be found elsewhere pushing prices higher,’ explains Furtas.

Energy feedstock accounts for the bulk of nitrogen production costs. Therefore, says Furtas, the nitrogen price increase partly reflects higher input costs.

‘The price of several energy benchmarks have increased dramatically and are currently well above the historically low 2020 levels. Natural gas and coal values are forecasted to move higher on average for 2021, pushing up the cost curve for new production.’

Furtas points out new nitrogen capacity projects being constructed in India, Nigeria, Brunei, Russia and Uzbekistan will total approximately 5.5 million tons, which will hit the market in the next 12 to 18 months and could put pressure urea prices in the longer term.

‘Alberta retail fertilizer prices have increased significantly. Leading the way is urea, which has increased nearly 9% since November and in January had an average price of $540 per tonne, which is $40 per tonne higher compared to November.’

Furtas points out anhydrous ammonia has experienced slower gains. The January price is only 5% higher than the November low in 2020. With the average January price for anhydrous ammonia in Alberta coming in at $871 per tonne, this is approximately $42 per tonne higher than in November.

Figure 1.0 provides a fertilizer purchase comparison on the basis of cost per pound of ‘actual’ nutrient, in this case, actual nitrogen. Alberta January urea comes in at 53 cents per pound of nitrogen, whereas anhydrous is slightly less at 48 cents per pound of nitrogen.

‘So far, nitrogen prices in Alberta appear to have been relatively insulated from global price trends, or perhaps experiencing a delay,’ explains Furtas.

‘Retail prices may increase in the coming months as fertilizer demand picks up and producers get set for spring planting operations. The global supply and demand picture for nitrogen will eventually reach the North American market.’