the World Bank Fertilizer Price Index (see June 2020 monthly prices) was 4% higher in April than at the start of 2020—reflecting production curtailments and supply chain disruptions. However, this outlook is subject to considerable uncertainty. A second COVID-19 wave may force governments to reimpose stringent measures, thus disrupting production and supply chains. Or, a sustained depreciation of currencies of major fertilizer markets—Brazil, China, India, and Russia—against the U.S. dollar may limit fertilizer demand. Moreover, the worst locust infestation in more than 25 years is threatening food security and livelihoods in Africa and South Asia and could further affect fertilizer use by destroying large swaths of crops.Prices were relatively resilient during the early stages of the COVID-19 pandemic—
DAP (diammonium phosphate) prices declined by 6.7% in May in part due to lower costs of raw materials, notably ammonia.The lockdown in Hubei—a region that generates more than one-quarter of China's DAP capacity—caused severe supply chain disruptions due to labor shortages. Phosphate fertilizer plants that shut down in January resumed production in March and have been largely operating as normal since April.
Urea prices fell to a near three-year low in May due to low seasonal demand and sharply lower feedstock costs. The decline followed price increases in March and April as lockdowns, quarantines, and border controls temporarily affected supplies due to a shortage of workers and challenges to transportation systems. European natural gas, a key input to urea production, fell to multi-decade lows in May—almost 60% lower than at the start of 2020. Likewise, coal, used extensively in China for nitrogen production, has also experienced price declines of 25% since January 2020.
Input costs for urea
MOP (muriate of potash, or potassium chloride) prices fell nearly 12% in May, erasing most of the gains in 2019. Demand has been relatively subdued in China and Southeast Asia due to the pandemic disruptions. Supply cutbacks outside of China have also been limited, except for a temporary suspension of mining operations in Spain and a reduction in operating capacity in a few European countries.