Key Element. Uralkali Market Analysis Report. July Issue. IPNI expert: is potassium fertiliser really necessary. Q2 potash market highlights

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1 Issue 2014 Uralkali Market Analysis Report Key Element July 2014 Q2 potash market highlights IPNI expert: is potassium fertiliser really necessary CH WITH RI PO Issue 2 (7), 2014 TA S H Report from XV International Grain Round Results of agronomy tests on litchi in Vietnam

2 Comment from our Director of Sales and Marketing Dear friends, Potash consumption recovered in the first half of 2014 after the sluggish demand of H Most markets show stable demand as the farmers take advantage of the favourable economics. You can find more details in Q2 Market Overview on Page 3. We see that farmers pay more and more attention to profitability of their business and return on investment. An essential part of it is correct fertiliser application. In order to calculate how much potash should be applied, for example, you need to understand how much potash required by plants can be met by the soil. In the current issue of Key Element we present an article by the experts from the International Plant Nutrition Institute describing different ways of measuring potash content in soil. We also continue our series of reports on the research conducted by our agronomy specialists in different regions of the world. In this issue you will find an exciting account from Vietnam about potash influence on litchi. We would welcome your feedback, comments and questions and will try to address them in our next issues. Please contact us at Kind regards, Oleg Petrov, Uralkali Director of Sales and Marketing Key Element (7) Page 02

3 Potash market highlights Potash market overview Q The second quarter of 2014 saw a surge in demand compared to Q Volumes for granular potash were strong, while trends for standard potash were solid. Prices were firming globally during Q supported by strong demand and limited availability of granular potash in major spot markets. The overall supply picture during the second quarter remained tight, with most producers struggling to satisfy requests from customers. In Brazil, demand accelerated through Q The latest statistics from ANDA shows Brazil imported 4.5 million metric tonnes in the first six months of the year, a 24% year-on-year increase. Brazil has seen a relatively strong price momentum in H due to a tightness of granular product market. Potash prices have increased by US$35-40/t cfr from the start of the year. Import volumes and prices are expected to remain stable through Q In 2014, potash import volumes are expected to exceed last year s record level, reaching million metric tonnes. During Q North American market remained tight and prices firmed. Rail logistical problems continued but seemed to ease. North American producer inventories as of the end of May 2014 stood at 2.35 million metric tonnes, 15% below the five year average and down 20% year on year. North American producers summer fill programme concluded at the start of June, led to the inland warehouse price hike to US$390/st fot. This puts N. American list prices among the highest in the world. Demand for summer fill product is strong. Potash deliveries to the North American market are expected to be strong throughout H2 2014, fuelled by the need to restore depleted dealer inventories, which stood at the low level as of end of H European markets remained seasonally slow during the quarter. The tight granular/specialty markets, and just-in-time nature of purchasing activity, have led to 10-20/t targeted price increases heading into autumn application. European demand is expected to remain solid during the rest of the year. In China, Q2 demand was low due to a seasonal lull and is expected to revive towards the end of August. Shipments continue under H1 contracts and are expected to run possibly into August. According to customs data, China imported 3.3 million metric tonnes in the first five months of the year, a 1% year-on-year increase. In India, contract volumes were booked with producers during the second quarter. The total contracted quantity is c. 3.9 million metric tonnes. Indian demand was softer than expected due to lower than typical monsoon rains in June. Rainfall is expected to improve in July. According to customs data, India imported 1.65 million metric tonnes in the first six months of the year, a 30% yearon-year increase. India is expected to import million metric tonnes in calendar year Indian fertiliser companies are buoyant about the recent change of government. They are hoping that the new government 30% 20% 10% 0% Global grains stocks to use ratio Corn Wheat Soybean will push through reform measures in terms of NBS policy. The new government is considering raising the retail price of urea nitrogen fertiliser by 10%, either as part of or before the new government s first budget in July. The increase in urea retail prices would mark an important step by the new government towards cutting subsidies for nitrogen fertilisers. Southeast Asian markets were in a steady way during the second quarter, with competition among suppliers being particularly tough in Malaysia, Indonesia and Vietnam. Major markets in the region are currently seeing little activity due to Ramadan. The region is expected to have a year on year increase in demand from 8.1 million tonnes to approximately million tonnes in Potash demand in 2014 may exceed 2011 level, and probably set a new record. Increases are expected in all major regions partially aided by restocking needs. Strong demand combined with limited availability of granular potash continue to support potash prices in major spot markets / / /15F Source: Uralkali s estimations Key Element (7) Page 03

4 Potash market highlights Potash market overview Q Benchmark fertiliser prices Potash prices Annual averages Quarterly averages Jan-Dec Jan-Dec Jan-Dec Apr-Jun Apr-Jun Unit DAP 1 (US$/t) Phosphate rock 2 (US$/t) Potassium chloride 3 (US$/t) Urea 4 (US$/t) Source: World Bank 26 June January 2014 Potash CFR Standard Bulk Southeast Asia Spot (US$/t) India contract ((US$/t) 322 China contract (US$/t) 305 Potash CFR Granular Bulk Brazil CFR Spot (US$/t) Europe, CFR ( /t) Source: Argus FMB, Fertecon 1 Standard size, spot FOB US Gulf. 2 Phosphate rock (Morocco), contract F.A.S. Casablanca. 3 Standard grade, spot FOB Vancouver. 4 FOB Eastern Europe mln metric tonnes Global Potash inventory Level N.America SEA Brazil India China 2 EMEA - end of Dec end of May 2014 Source: Uralkali s estimations US$/t The Dynamics of potash prices Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Source: Argus FMB 1 Inventory doesn t include domestic potash producers stocks, excl. China. 2 Including domestic producers stocks, port stocks, pile channels stock, NPK warehouse stocks. - Potash standard CFR Southeast Asia, US$/t - Potash granular CFR Brazil, US$/t - Potash granular New Orleans barge, US$/mt - Potash granular CIF NW Europe, US$/t Key Element (7) Page 04

5 Agropage: Is potassium fertiliser really necessary? Is potassium fertiliser really necessary? Author: T. Scott Murrell, U.S. Director, International Plant Nutrition Institute Potassium is required by plants. Not applying K on soils with low indigenous supplies limits yields and production and is considered a form of land degradation. On soils with high indigenous supplies, omitting K will not reduce yields or production; however, continued withdrawal of K through successive crop harvests will eventually deplete indigenous supplies to yield-limiting levels, as has been observed in several areas around the world Plants require 17 nutrients to develop properly. Potassium (K) is one of these and is taken up in large quantities. It is therefore termed a macronutrient. Plants get their K from the soil via their roots. Consequently, one of the most basic questions that soil fertility and plant nutrition scientists have addressed over the past several decades is, How much of a plant s nutrient needs can be met by what s already in the soil? To determine if a soil already has enough K, scientists apply incremental amounts of K then measure the degree to which plants respond. A zero rate of K, termed a check provides a basis for comparison. Increases in growth and yield with K additions, when compared to the check, indicate that the soil supply alone is not sufficient to meet the plant s requirements. An experimental design that is often used to measure response is the omission plot. Omission plots are a set of treatments that examine how the lack of one nutrient affects yields and nutrient uptake when all other nutrients are at sufficient levels. As an example, a recent metaanalysis from China summarised results from a total of 522 omission plot experiments across three major wheat-growing regions (Liu et al., 2011). The average response to K additions was 0.74 Mg ha-1. Plant response has been and continues to be the basis for determining whether or not K is needed. One general type of approach, termed plant-based in this article, relies primarily on these types of plant measurements. The other approach, soil-testing based also relies on plant response but incorporates soil analysis. We discuss each of these approaches. Plant-Based Approaches To determine how much of the plant s nutrient needs can be met by the soil, plant-based approaches use measurements of K uptake. Using omission plots, the indigenous supply of K in the soil is found by measuring the total amount of K taken up by plants that are grown where no K has been applied but where all other nutrients are in sufficient quantities (Dobermann et al., 2003). The indigenous soil K supply is compared to the amount of K taken up by plants receiving adequate K. If both quantities are the same, then plant-available K supplies in the soil are sufficient. If K uptake by fertilized plants exceeds the indigenous K supply, then the soil supply of K is inadequate. Picture 1. Nutrient omission plots in spring wheat at the Experimental Agricultural Enterprise Omskiy of the Siberian Research Institute of Agriculture, Omsk District (left to right: Dr. N.А. Voronkova and Dr. V.V. Nosov). Photo taken by V. Nosov. Because it is not feasible to put omission trials on every parcel of ground that is to be evaluated, scientists assemble data from various sites and years where such trials have been conducted and create models that help them estimate indigenous soil K supplies and total uptake requirements for areas where no data exist. An example of this approach is Nutrient Expert (Pampolino, 2012). Key Element (7) Page 05

6 Agropage: Is potassium fertiliser really necessary? Soil Testing-Based Approaches Soil testing is another approach to determining how much of the plant s nutrient needs can be met by the soil. It is also built around plant response, but the emphasis has most commonly been on yield response rather than on nutrient uptake. Soil testing was developed to provide a method for predicting, before a crop is grown, whether or not soil K supplies are adequate (Bray, 1944). Soil testing usually uses chemical solutions to remove a portion of the K from soil particle surfaces that is considered to be plant-available. Because of the way these extracting solutions work, the K that is measured is termed exchangeable K. It is not a direct measure of the total amount of K available for plant uptake. Instead, it is simply an index that must be related to plant response to have any agronomic meaning. Creating this relationship is accomplished with a calibration study. Relative maize yield (%) Soil test K (ppm) Figure 1. An example of soil test calibration data (adapated from Barbagelata and Mallarino, 2013). In a calibration study, a representative sample of the soil is taken from the experimental site and analysed for exchangeable K. Then one of two experiments is conducted. The first option is an omission plot, like that described above, where crop yield without K (the check) is compared to crop yield fertilised with K. The second option is a K rate study, where incremental rates of K, including a check, are applied. The first approach measures yield response only. The second approach measures not only yield response but, when combined with statistical models, the quantity of K that was needed to just reach the highest yield attainable at that site. The yield of the crop grown without K is expressed as a percentage of the yield obtained with sufficient K. This percentage, called relative yield indicates whether or not the indigenous supply of K is adequate. A relative yield less than 100% signals deficiency. The soil test level measured at that site is then associated with the observed relative yield. This association indicates what percent of the attainable yield can be met by the supply of indigenous soil K indexed by the soil test (Dahnke and Olson, 1990). A recent example of such a calibration comes from Iowa State University (Barbagelata and Mallarino, 2013) and is shown in Figure 1. Each point in the figure comes from one study conducted in one year, what scientists call a site-year. The figure demonstrates that when many site-years of data are combined, a generalised relationship emerges: as the soil test level of K declines, crop yields decline when left unfertilised, indicated by lower relative yields. Such a relationship forms the basis of soil testingbased approaches that predict whether or not soil supplies of plant- available K are adequate at any given location. Nutrient Budgets A key component of both plant-based and soil testing-based approaches is the nutrient budget. It is calculated by subtracting the amount of K removed from a parcel of land from the quantity of K applied. Positive budgets indicate K enrichment while negative ones signal K depletion. Most often, partial budgets are calculated. These simplified budgets compare: 1) nutrients removed with harvested portions of plants, termed crop removal and 2) K applied with commercial fertilisers, manure, and/or biosolids. These budgets are partial because they do not consider all inputs and outputs. Potassium budgets are of great interest to scientists around the world. They indicate whether agricultural practices are depleting, enriching, or maintaining indigenous K supplies. Where indigenous supplies of K are low, enrichment is appropriate. Depletion is appropriate where indigenous supplies are high, such as in more arid agricultural areas; however, there is a caveat to depletion. If it occurs long enough on soils with high amounts of K, the indigenous supply eventually becomes inadequate for crops. At a workshop held in Uganda, stakeholders determined that negative nutrient budgets should be used as an indicator of land degradation (Bekunda and Manzi, 2003). The stakeholders were farmers, traders, decision and policy makers, staff of extension, researchers, and development organisations. Case studies demonstrated that, commercial farmers appear not to be re-investing some of the sale proceeds into replacing nutrients removed in harvests. Thus, K applications must not only provide enough K to meet crop needs, they also need to sustain plantavailable soil K supplies over the long term. Conclusion Potassium fertiliser is necessary. Both plant-based and soil testing-based approaches inform decisions about whether or not a K application is needed to provide plants with adequate nutrition and to sustain soil productivity. Key Element (7) Page 06

7 Agropage: Is potassium fertiliser really necessary? References: Barbagelata, P.A. and A.P. Mallarino Field correlation of potassium soil test methods based on dried and field-most soil samples for corn and soybean. Soil Sci. Soc. Am. J. 77: Bekunda, M. and G. Manzi Use of the partial nutrient budget as an indicator of nutrient depletion in the highlands of southwestern Uganda. Nutr. Cycl. Agroecosys. 67: Bray, R.H Soil-plant relations: I. The quantitative relation of exchangeable potassium to crop yields and to crop response to potash additions. Soil Sci. 58: Dahnke, W.C., and R.A. Olson Soil test correlation, calibration, and recommendations. p In Westermann, R.L. (ed.) Soil testing and plant analysis. 3rd ed. Soil Science Society of America, Madison, WI, USA. Dobermann, A., C. Witt, S. Abdulrachman, H.C. Gines, R. Nagarajan, T.T. Son, P.S. Tan, G.H. Wang, N.V. Chien, V.T.K. Thoa, C.V. Phung, P. Stalin, P. Muthukrishnan, V. Ravi, M. Babu, G.C. Simbahan, M.A.A. Adviento, and V. Bartolome Estimating indigenous nutrient supplies for site-specific nutrient management in irrigated rice. Agron. J. 95: Liu, X., P. He, J. Jin, W. Zhou, G. Sulewski, and S. Phillips Yield gaps, indigenous nutrient supply, and nutrient use efficiency of wheat in China. Agron. J. 103: Pampolino, M.F., C. Witt, J.M. Pasuquin, A. Johnston, and M.J. Fisher Development approach and evaluation of the Nutrient Expert software for nutrient management in cereal crops. Comput. Electon. Agr. 88: Key Element (7) Page 07

8 Regional News: Russia Uralkali sponsors XV International Grain Round The XV International Grain Round The grain market yesterday, today and tomorrow took place in Gelendzhik between 3 and 6 June The conference was organised by the Russian Grain Union with the support of the Ministry of Agriculture of the Russian Federation, the Ministry of Economic Development of the Russian Federation, the Federal Tariff Service and the State Duma Committee on Agriculture. Uralkali was one of the sponsors of the event. Over 800 representatives from 31 countries, including Russia, USA, Canada, UK, Germany, France, Turkey, Egypt, Indonesia, Singapore and Kazakhstan attended the event this year. The participants of the conference discussed issues related to legislative support for the industry and regulation of the grain market. The speakers presented production, prices and market environment forecasts. The conference also featured an extensive discussion of the integration processes in Eurasia. The participants from the CIS spoke about the development of the agricultural sector in the countries of the Customs Union. One of the most important items on the agenda was the competitiveness of the grain industry following Russia s accession to the WTO. At the session on new technologies in the grain sector, a report on the experiments held in 2013 and related to the potash fertiliser application was presented. The report, focusing on the cultivation of rice, one of the most important crops for the Krasnodar Territory, highlighted the positive impact of fertilisers on crop quality and confirmed the economic efficiency of fertiliser application. Key Element (7) Page 08

9 Regional News: Vietnam Potassium increasing the sugar content and nutritional value of litchi in Vietnam The agronomic service of Uralkali, together with the Institute of Soil Science and Agricultural Chemistry of Vietnam, conducts research on the influence of potassium nutrition on the yield and fruit quality of litchi. Litchi fruits are not only tasty, they abound in vitamins: 100 grams contain 44 grams of very healthy vegetable lipids, 10 mg of magnesium, 5 mg of calcium, 31 mg of phosphorus, 171 mg of potassium, 72 mg of vitamin C and 16 g of fructose. However, the main thing is a very high content of nicotinic acid vitamin PP, which actively prevents the development of atherosclerosis. Litchi fruit quality is largely dependent on the conditions of cultivation, so plant nutrition is a key factor. The study of traditional technologies used by farmers, and their comparison with modern and scientifically proven ones, clearly indicate a higher efficiency of the latter. There are both a quantitative increase in yields of 15-20% and a significant improvement in quality indicators. The experiments conducted by agronomists in Vietnam have shown that the use of potassium chloride affects the sugar content and nutritional value of litchi. The indirect sign proving the high quality of the fruit is the colour of the skin and its richness plants without the lack of potassium have a thick skin of a dark red colour. This quality allows customers to easily choose the right fruit. On the photos you can clearly see the difference in the colour of fruits cultivated using traditional technology and technology based on the optimisation of potassium nutrition. Picture 2. Traditional technology (low potash application, yellow skin) One of the factors limiting the distribution of fresh litchi fruits is an extremely short shelf life even with the use of low temperatures (which are not easy to achieve and maintain in the tropics) it does not exceed three days. Application of potash fertilisers can increase it up to five days, i.e. almost twofold. Because of this, farmers are able to deliver their fruits to the big cities and sell their products at a higher price. Picture 3. Balanced application (high potash application, red skin) Thus, the coordinated work of Uralkali specialists and the employees of local research institutions can improve the welfare of farmers and their families, as well as give to millions of consumers the opportunity to enjoy the amazing taste and aroma of this exotic fruit! Key Element (7) Page 09