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Current world fertilizer trends and outlook to 2013

FOOD & AGRICULTURE ORGANIZATION OF THE UNITED NATIONS

Rome, 2009

World fertilizer trends and outlook to 2013	2

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	Table of contents
Preface.................................................................................................................................................	3
Executive summary..............................................................................................................................	4
The agricultural context........................................................................................................................	5
Demand................................................................................................................................................	5
Supply ................................................................................................................................................	10
Nitrogen ..........................................................................................................................................	10
Phosphate ......................................................................................................................................	10
Potash ............................................................................................................................................	10
Supply and demand balances ...........................................................................................................	11
The regional fertilizer situation ...........................................................................................................	12
Africa ..............................................................................................................................................	12
Latin America .................................................................................................................................	12
North America ................................................................................................................................	12
East Asia ........................................................................................................................................	13
South Asia ......................................................................................................................................	13
West Asia .......................................................................................................................................	13
Eastern Europe & Central Asia ......................................................................................................	13
Western & Central Europe .............................................................................................................	14
Oceania ..........................................................................................................................................	14

World fertilizer trends and outlook to 2013	3

Preface

This report presents the world nitrogen, phosphate and potassium fertilizer medium-term supply and demand projections for the period 2008–2013.

In June 2009, FAO issued its annual invitation to the Working Group of Fertilizer Organizations to review the prospects for fertilizer demand, supply and balances through to 2013.

The Working Group comprised:

EFMA	European Fertilizer Manufacturers’ Association
FAI	Fertiliser Association of India
IFA	International Fertilizer Industry Association
IFDC	An International Center for Soil Fertility and Agricultural Development
Imphos	World Phosphate Institute
K+S	K+S KALI GmbH
TFI	The Fertilizer Institute
FAO	Food and Agriculture Organization of the United Nations

In October 2006, the FAO/Fertilizer Organizations Working Group adopted a new protocol for the preparation of nutrient supply/demand balances based on the work of the IFA Production and International Trade Committee in 2005/06. The main objectives of the revised protocol were to take into account the resilient surplus between production and consumption and to update the parameters used for the computation of supply and losses.

Definitions of the terms used and their relative criteria are listed below:

•Supply: effective capacity, representing the maximum achievable production. Supply is computed from the “nameplate capacity” (theoretical capacity), multiplied by the highest operating rate achieved in the previous 5 years. For new plants, a ramp up of the operating rates was established for the first 3 years of operation, ranging from 85 to 100 percent. Supply represents maximum potential production, also referred to as effective capacity.

•Fertilizer demand: the ability or the willingness of farmers to buy fertilizer at a given point in time. It is calculated on the basis of the probable consumption in one calendar year, taking into account the merge between two agricultural years.

•Non-fertilizer demand: consumption for non-fertilizer use, referred to as industrial use.

•Losses: the unavoidable losses during the life cycle of a product, from production to final consumption. The extent of loss is estimated as a percentage of total fertilizer and nonfertilizer demand.

•Balance: the difference between supply and demand (fertilizer demand + non-fertilizer demand). Balance is a medium-term indicator of potential changes in fertilizer nutrient demand and supply by region. Changes in installed supply capacity, operating rates and demand vary annually.

•Balance/demand ratio: the percentage of surplus or deficit reported in relation to the demand.

All fertilizer references are in terms of plant nutrients: nitrogen (N), phosphate (P2O5) and potash (K2O). On the graphs, nutrients may be referred to as N, P and K.

Fertilizer demand and supply data refer to the calendar year.

The contribution made by the Working Group of Fertilizer Organizations and the special efforts made by Philippe Dugast in bringing this publication to press are gratefully acknowledged.

World fertilizer trends and outlook to 2013	4

Executive summary

Following several years of continuous growth, the global economy entered a recession.

In 2008, attention focused on soaring food prices and food security. These issues are now partially concealed by the economic crisis, but this does not mean that the problem of undernourishment has been solved.

With respect to fertilizers, after 5 years of sustained demand and sometimes limited supply, world fertilizer is likely to have a large potential surplus through 2013, unless demand rises beyond expectations. Demand is forecast to increase by 24 million tonnes (compared with 2008).

The nitrogen sector will profit from new capacities announced for 2012. The global balance/demand ratio will double, increasing from 5 percent (at present) to 9 percent (in 2013). Some regions, such as West Asia, Africa and Latin America, will reinforce their export position, but others will remain in deficit (South Asia) or even increase their deficit (North America).

Phosphate sector: the global balance/demand ratio will remain stable at around 8 percent, until 2013, but some regions will remain in deficit (Latin America) or even increase their deficit (South Asia and Western and Central Europe).

Potash sector: the global balance/demand ratio will increase from 25 percent (at present) to

35 percent (in 2013), thanks to the contribution of North America and Eastern Europe and Central Asia (EECA), while some regions will remain in deficit (Africa, Latin America, East Asia and Oceania) or even increase their deficit (South Asia).

Note that the increase in global nutrient potential surpluses within the period does not mean that regions can afford fertilizers according to their real needs.

		Potential nutrient balance (thousand tonnes)
Region		2008	2009	2010	2011	2012	2013
Africa	N	1 448	1 957	1 963	2 537	2 749	3 729
	P2O5	4 580	4 274	4 390	4 836	5 374	5 714
	K2O	- 454	- 472	- 500	- 527	- 545	- 382
East Asia	N	- 1 939	- 1 120	- 471	- 78	943	662
	P2O5	133	507	1 205	1 692	1 890	2 049
	K2O	- 7 319	- 6 958	- 7 426	- 7 642	- 7 651	- 7 492
East Europe	N	14 060	13 883	13 805	13 563	14 095	14 308
and Central Asia	P2O5	2 323	2 306	2 285	2 343	2 298	2 235
	K2O	10 082	10 316	10 748	11 397	12 151	12 702
Latin America	N	1 087	984	602	509	1 574	2 342
and the Caribbean	P2O5	- 2 931	- 2 680	- 3 018	- 3 090	- 3 104	- 3 099
	K2O	- 3 770	- 3 660	- 3 939	- 4 195	- 4 486	- 4 452
North America	N	- 6 024	- 6 841	- 7 354	- 7 645	- 7 935	- 8 226
	P2O5	4 682	4 591	4 277	4 152	4 055	3 959
	K2O	8 935	9 484	9 435	10 100	11 350	12 127
Oceania	N	- 119	- 128	- 168	- 206	- 167	- 294
	P2O5	- 162	- 114	- 122	- 151	- 174	- 194
	K2O	- 336	- 302	- 320	- 335	- 350	- 359
South Asia	N	- 6 209	- 6 369	- 6 234	- 6 722	- 6 753	- 6 753
	P2O5	- 5 236	- 5 681	- 5 815	- 6 182	- 6 553	- 6 941
	K2O	- 3 653	- 3 482	- 3 598	- 3 826	- 4 050	- 4 275
West Asia	N	5 793	6 267	6 602	8 781	9 560	10 919
	P2O5	679	570	527	647	1 275	1 450
	K2O	3 024	3 051	3 268	3 392	3 495	3 467
West and	N	- 1 789	- 1 624	- 2 170	- 2 509	- 2 902	- 3 259
Central Europe	P2O5	- 1 498	- 1 150	- 1 370	- 1 527	- 1 682	- 1 769
	K2O	859	1 557	1 320	1 120	912	790
World	N	6 309	7 010	6 576	8 231	11 163	13 429
	P2O5	2 570	2 624	2 360	2 721	3 381	3 404
	K2O	7 370	9 534	8 989	9 484	10 827	12 126

Table 1 World and regional balances 2008 to 2013

World fertilizer trends and outlook to 2013	5

The agricultural context

Following several years of good health, the world economy entered a severe recession. What began as a financial crisis during the summer of 2008 had become a serious worldwide

economic crisis by the end of the year. All the advanced economies fell into recession during the first half of 2009, and it is likely that this situation will continue until the end of the year, even if there are some signs of a slight improvement. Emerging economies have also been severely hit by the depression.

According to the OECD-FAO Agricultural Outlook 2009, despite the significant impact of the global crisis on all sectors of the economy, agriculture should come off relatively lightly, thanks to the recent period of relatively high incomes and the relatively income-inelastic demand for food.

The average prices of agricultural commodities for the next 10 years are still projected at the levels of the previous decade at least (crop prices are projected to be 10–20% higher in real terms relative to 1997–2006, while for vegetable oils real prices are expected to be over 30% higher).

Following an economic recovery, most of the growth in agricultural production and consumption will continue to come from developing countries. This is the case particularly for livestock products where the driving forces are income and population growth, and considering the trend towards higher animal protein diets and continuing urbanization.

Furthermore, according to a recent FAO study based on longer-term population and income projections, global food production needs to increase more than 40% by 2030 and 70% by 2050 (nearly 100% in developing countries), compared to average 2005–07 levels, in order to meet the challenge of a 40 percent increase in the world population and to raise average food consumption to 3 130 kcal per person per day by 2050.

Of the growth in crop production, 90% (80% in developing countries) is due to come from higher yields and increased cropping intensity with adequate use of fertilizers, the remainder from land expansion.

Demand

The soaring prices of commodities in 2008 highlighted that the fertilizer-to-crop price ratio is a key factor in determining the behaviour of farmers purchasing fertilizers. Though the ratio between international fertilizer prices (urea and di-ammonium phosphate as major indicators) and grain prices is currently lower than in 2007, farmers are exhibiting a wait-and-see attitude.

Given the high fertilizer prices of mid-2008, some farmers used greater amounts of organic nutrient sources, with potentially long-term impacts on crop nutrition practices.

Farmers who do wish to use fertilizers may be constrained in some countries by the lack of affordable credit.

Fertilizers, like other commodities, have been affected by the economic crisis. According to IFA, aggregate world fertilizer demand in 2008/09 is estimated to be down by 5 percent compared with the previous year: from 168 to 160 million tonnes of nutrients.

Nitrogen is least affected, because drastic reductions in N fertilizer application rates have immediate negative consequences for yield; this is not the case with P and K fertilizers.

Drops in consumption have been registered in all regions except Africa, South Asia and EECA (in these latter two regions farmers benefit from strong government support for increased fertilizer use). The most significant drops in volume are in Western and Central Europe, North America and Latin America.

World fertilizer trends and outlook to 2013	6

This study is based on the assumption of a recovery beginning in 2009/10.

Given the 2-year decline, it is difficult to express average rates of increase; they depend on the point of reference. Two sets of data are therefore presented, according to the reference year.

First method -

Comparing 2013 (end of forecast period) with 2007 (the reference year).

Global NPK nutrients consumption (Mt)

190
180
170
160
150
2007	2008	2009	2010	2011	2012	2013

8%

6%

4%

2%

0%

-2%

-4%

-6%

Table 2

annual increase rate

N

annual increase rate

P

annual increase rate

K

A

a

n

ica

ia

ia

t

Asia

eania

d

ric

b

Worl

ea

ia

f

rib

Amer

As

As

As

Oc

East

outh

s

ntral

Europe

ic

a

h

We

C

No

S

C

Amer

a

rope

&

n

al

r

t

tin

u

Ce

a

n

E

&

L

r

tern

Easte

s

We

annual increase rate

Continent

Region

N

P2O5

K2O

Africa	Africa	3.8%	4.3%	3.3%
America	Latin America Caribbean	1.2%	0.9%	1.4%
	North America	0.5%	0.8%	0.2%
Asia	East Asia	1.5%	1.9%	1.5%
	South Asia	3.4%	6.0%	7.5%
	West Asia	1.2%	-0.2%	0.4%
Europe	Eastern Europe & Central Asia	5.6%	6.5%	5.1%
	Western & Central Europe	-0.7%	-3.1%	-2.5%
Oceania	Oceania	0.0%	-2.1%	-0.6%
World		1.7%	2.8%	3.2%

Second method -

Taking 2010 as the start of the recovery period, the rates of increase represent the slope of the fitting curve from 2009 onwards.

The figures are as follows:

Global NPK nutrients consumption (Mt)

190

180

170

160

150

2007

2008

2009

2010

2011

2012

2013

World fertilizer trends and outlook to 2013	7

8%

annual increase rate

N

annual increase rate

P

annual increase rate

K

6%

4%

2%

0%

ica

ean

America

a

Asia

Asia

sia

ope

Oceania

ld

fr

Asi

lA

Wor

A

ibb

ast

South

t

ur

s

Centra

E

ar

E

e

al

C

rth

W

erica

No

e &

&

Cent

Am

p

n

in

o

Eur

er

t

est

La

Eastern

W

Table 3

		annual increase rate
Continent	Region	N	P2O5	K2O
Africa	Africa	4.6%	6.0%	4.6%
America	Latin America Caribbean	4.5%	5.7%	5.6%
	North America	1.2%	3.0%	5.3%
Asia	East Asia	1.6%	2.5%	5.3%
	South Asia	2.6%	4.2%	5.3%
	West Asia	2.8%	4.0%	5.8%
Europe	Eastern Europe & Central Asia	5.8%	7.5%	3.8%
	Western & Central Europe	1.8%	6.4%	6.2%
Oceania	Oceania	2.5%	3.2%	4.3%
World		2.2%	3.8%	5.3%

This approach takes into consideration the period of depression (2008–09) and the potential of a strong recovery beginning in 2010.

At global level, a comparison with last year’s forecast points to a sustained increase for P and K and a more moderate increase for N. The latter is the result of revised figures for East Asia as China approaches “mature” market status with regard to N fertilizers. The forecast for world consumption in 2013 is some 185 million tonnes of nutrients, compared with the 2008 forecast of 192 million tonnes for 2012 (from a starting figure of 175 million tonnes in 2008).

At regional level, most increase in demand during the next 5 years will continue to come from Asia and, to a lesser extent, from Latin America.

Fertilizer consumption in Africa is expected to pick up in some countries in response to government initiatives to establish fertilizer subsidy schemes, as well as in response to development initiatives reported by IFDC and FAO.

East Asia and South Asia together will account for over one-half of the total growth of global fertilizer consumption.

In East Asia, the growth in regional demand is expected to decline as China approaches “mature” market status for N and P fertilizers. Recycling nutrients from organic material is increasingly considered. Fertilization is more balanced than in the past. The increase in rate of fertilizer consumption is likely to be lower for the outlook period than for the past decade.

World fertilizer trends and outlook to 2013	8

Demand is forecast to remain high in South Asia, as large amounts of fertilizer are required to ensure food security through intensification. However, according to FAI, the forthcoming revision of the fertilizer subsidy scheme in India could impact the outlook.

Fertilizer demand in West Asia is only expected to rise modestly, since the potential for increasing crop production in the region is limited and conditioned by weather conditions and is thus very uncertain.

The expansion of fuel ethanol production from maize in North America remains the principal driving force behind regional agriculture capable of sustaining the overall fertilizer demand. According to TFI, the region is expected to recover relatively quickly from the significant drop recorded in 2008/09 (particularly with regard to P and K).

Fertilizer demand in Latin America is expected to remain depressed in 2009. Recovery is forecast to start in 2010, driven by South American countries (Brazil and Argentina) strengthening their position in the international agricultural market and, to a lesser extent, by Central America (Mexico) where there is a significant increase in fruit and vegetable production.

Thanks to the potential to convert large areas of idle land back to cropping, in the medium term Eastern Europe and Central Asia (CIS in general, Russia in particular) can provide cereals and oilseeds to the international market. Fertilizer consumption in the region is therefore forecast to increase steadily in response to a favourable policy context and to the potential for increasing production over a relatively short period.

In Oceania, agriculture has barely recovered from two consecutive drought-affected years. Consumption is expected to recover slowly (subject to drought conditions) and reach a level at the end of the outlook period comparable to the period 2007–08.

Table 4

	Regional and subregional fertilizer consumption 2008-2013 (Mio t)
	Region		N	P2O5	K2O	Total
Africa	Africa	2008	2.5	0.9	0.4	3.8
		2013	3.3	1.2	0.5	4.9
America	Latin America Caribbean	2008	5.9	4.5	4.6	15.0
		2013	7.2	5.7	5.7	18.5
	North America	2008	13.0	4.1	3.8	20.9
		2013	14.0	4.7	4.9	23.6
Asia	East Asia	2008	40.0	14.1	8.1	62.2
		2013	43.5	16.1	10.2	69.8
	South Asia	2008	19.5	7.5	3.5	30.5
		2013	22.2	9.4	4.1	35.7
	West Asia	2008	2.9	1.0	0.3	4.2
		2013	3.4	1.3	0.4	5.1
Europe	East Europe & Central Asia	2008	3.6	0.9	1.2	5.6
		2013	4.6	1.2	1.4	7.2
	West & Central Europe	2008	11.2	3.0	3.5	17.7
		2013	11.4	3.0	3.7	18.1
Oceania	Oceania	2008	1.1	1.1	0.3	2.6
		2013	1.2	1.2	0.4	2.8
World		2008	99.9	37.0	25.8	162.6
		2013	110.6	44.0	31.2	185.8

World fertilizer trends and outlook to 2013	9

Regional and sub-regional change

in world Fertilizer consumption 2008-2013

Mt nutrients

70

60

variation 2008 to 2013

50

consumption 2008

40

30

20

10

0

ica

n

ica

a

ia

a

a

e

a

a

si

h As

si

si

urop

Oceani

r

e

r

tA

tA

lA

Af

ibb

me

r

s

out

Wes

entra

al

E

a

th

A

Ea

a

C

S

r

or

&

C

ent

meric

N

e

&

C

urop

n

A

in

r

te

t

n

E

Wes

a

L

aster

E

Regional and subregional contribution to change in world Fertilizer consumption 2008-2013

Western & Central
Europe 2%	Oceania 1%
Eastern Europe &	Africa 5%
Central Asia 7%
West Asia 4%	North America 12%
	Latin America
South Asia 22%	& Caribbean 15%

East Asia 32%

Compared with last year’s outlook, less weight is given to East and South Asia (55% vs 65%), and more share is given to North America (12% vs 6%) and EECA (7% vs 4%).

According to Imphos and IFA, world phosphate rock capacity is projected to reach 248 million tonnes in 2013, representing an overall growth of 30 percent compared with 2008. Several projects for new mines or capacity expansions by current producers

have been delayed due to rising costs and delays in integration with new downstream production. Rock supply is projected to increase in East Asia, Africa, Latin America, West Asia and Oceania.

Figures for phosphate rock are not reported herein. Between 2008 and 2013, global phosphoric acid

capacity is forecast to increase by 8.5 million tonnes and reach 53.5 million tonnes of P2O5.

Close to 40 new MAP, DAP and TSP units (mostly DAP) will be constructed in ten countries, including

18 units in China. New facilities are planned in Africa, West Asia, East Asia and Latin America.

Phosphate

North America 0%

Latin America Caribbean 9%

Africa 19%

Oceania 0%

Regional and sub-regional contribution to change in global Phosphoric Acid supply 2008-2013

East Asia 55%

South Asia 2%

West Asia 12%

Eastern Europe & Central Asia 3%

Western & Central

Europe 0%

World fertilizer trends and outlook to 2013	10

Supply

Figures for supply are provided by IFA for ammonia and potash, and by Imphos and IFA for phosphoric acid.

Note that Capacities are “nameplate” figures (theoretical capacities) officially given by producers, while Supply represents the maximum achievable production facing a new demand (taking into account the unavoidable dysfunctions in production, logistics adjustments etc.); in no case do they refer to the current production.

	Nitrogen	Regional and sub-regional contribution to change
		in global Ammonia supply 2008-2013
	According to IFA, global ammonia capacity is	Western & Central
	projected to increase by 20 percent, from 149 million
		Europe 0%	Oceania 0.5%
	tonnes of N in 2008 to 179 million tonnes in 2013.
		Eastern Europe &
	Two-thirds of this increase will come from new units,		Africa 12%
		Central Asia 6%
	the remaining third will be the result of revamping		Latin America
	activities.
		West Asia 23%	Caribbean 12%
	Global ammonia capacity is expected to increase at
	an average rate of 6 million tonnes of N per year, but		North
	the forecasted figure for 2012 alone is almost		America 0%
	8 million tonnes. In terms of regional distribution,
	most of the growth in capacity will occur in East	South Asia 10%	East Asia 34%
	Asia, West Asia, Latin America and Africa.

	Potash	Regional and sub-regional contribution to change
	Market conditions in recent years and strong	in global Potash supply 2008-2013
	demand prospects in the medium term have
	prompted many prospective producers to invest in	Western & Central Europe 0%
	exploration and capacity development programmes.		Oceania 0% Africa 2%
	According to IFA, there are numerous potash	Eastern Europe &	Latin America
		Central Asia 27%
			Caribbean 4%
	projects in over 20 countries, but only a small
	number will be implemented during the next 5 years.
	Global potash capacity is forecast to increase from	West
	40 million tonnes of K2O in 2008 to 54 million tonnes	Asia 5%
	of K2O in 2013. This additional capacity will come
	mostly from Canada, Russia and China, and to a	South Asia 0%	North
	lesser extent from West Asia, Latin America and		America 42%
	Africa.	East Asia 20%