Fertilizer markets will be neutral to slightly bearish the coming three months, according to the Rabobank Fertilizer Quarterly Q2. Across-the-board price support for fertilizers seems possible only if volumes discipline from suppliers remains or intensifies. In demand terms, price support would have to originate from India and Brazil.

Currently, demand in India remains fragile as buyers await more clarity on rupee volatility and monsoon rains. Brazilian buyers are holding out on significant purchases, based high-beginning stock levels and a subdued agricultural outlook. "In Brazil, we expect that full-year fertilizer imports in Brazil, could decline with as much as 15 to 20 percent YOY," says Rabobank analyst Victor Ikeda.

Significant urea volumes are still hanging over the market. Supply management out of China has allowed prices to recover. But in Rabobank's view, this will not be sustainable, and weaknesses within the market will show sooner rather than later. From now on, China will be positioned to produce for market demand and does not have to build stocks towards their low tax season anymore. "It will be more difficult to cover short positions in Indian tenders with Chinese urea," says global strategist Dirk Jan Kennes.

The current state of the phosphate markets could best be described as lack luster. Demand is visible, but remains vulnerable. With phosphate supply far more consolidated compared to other nutrients, significant price slides are unlikely to occur either. Indian demand is continuing to be pressured by renewed Indian rupee volatility. Buyers in India are resisting higher prices, and with the possibility of another disappointing monsoon, buyers will continue to take a careful stance.

With potash contract prices settled at thin price increases in India and China, there is very little that can still excite global potash markets. In our view, very few drivers could support global potash prices in the coming months. Supply reductions out of Israel and Russia, due to a strike and a mine flooding respectively, have done little to support price levels, all pointing towards a continued situation of oversupply.