The Pulse: India’s potash crisis;
India is now seriously under-applying potash, accord to the latest commodity bulletin from Scotiabank. This is leading to an imbalance in nutrient application which is of increasing concern to the country’s domestic fertilizer association. It is, not unsurprisingly, contributing to low crop yields – at a time when the government in New Delhi is urging India’s farmers to lift harvests to feed the ever-increasing number of mouths. It is expected that by 2050 there will be 1.6 billion people living in India.
Scotiabank says the nitrogen to potassium ratio of fertilizer application is now 10:1 – the optimal is 2:1. “If India is to improve its yields – important for food security – it must step up potash application again,” says Scotiabank’s Patricia Mohr. She expects India to resume buying potash in the coming months, although the order pick-up may be modest. Mohr expects world potash demand to rebound in 2013 to about 54 million tonnes as many buyers restock.
Spot potash prices inched lower from $456/tonne in November to $452.50 in December and to $445/tonne in early January. They were $500/tonne a year ago. Mohr says prices likely moved lower still in later January with Canpotex’s new spot pricing for South-east Asia being $450/tonne. These figures do not include contract prices, mainly to China.
In 2012, world potash shipments fell to an estimated 48 million to 49 million tonnes, down 13% on the 54.8 million tonnes in 2011. While China’s imports rose in the first 10 months of 2012, China deferred contracts in the second half.
As noted above, India has been deferring potash purchases with farmers preferring urea fertilizer. Urea is produced within India while potash and phosphate have to be imported. In addition, a 25% depreciation in the rupee against in the US dollar from mid-2011 to mid-2012 forced up domestic potash prices.
Scotiabank notes that delays in orders from India and China encouraged others – including Malaysia and other South-east Asia customers – to hold off in expectation of lower prices.