Phosphate Market Reality Check

By James Wellstead — Exclusive to Potash Investing News

Phosphate Market Reality Check

Strong crop numbers expected in the US have provided significant support for the phosphate market in recent months despite a less than spectacular global economic reality. However, it is still too early to judge whether a redeeming US harvest can carry the phosphate market to higher ground.

Led by weak data out of China and the US, fears have been compounded in recent days as Spain's borrowing edged to levels near those that have forced countries like Greece and Italy to seek bailouts.

“Investors are hoping for fresh monetary easing in the near future,” Yang Yining, an analyst at Shanghai-based Capital-Edge Investment & Management Company, told the Associated Press this week. “[B]ut with the lingering inflationary pressure, the market will likely remain unstable.”

Yet despite the unstable global marketplace, agricultural markets continue to adjust to poor weather and record low stocks for a number of key coarse grains.

Tuesday's USDA monthly World Agricultural Supply and Demand Estimates (WASDE)  report provided a bit of a check to bearish market sentiment as US corn data continues to show a rebuilding of corn capacity and stock within the country after stockpiles have been driven down in recent years.

Further, the WASDE numbers showed that US soybean production has begun to make up for declines coming out of South America on the back of weather-induced production reductions.

Phosphate prices have continued to remain steady on the month, but falling prices have been the trend for 2012 thus far. Hitting just below US $500/tonne at the beginning of March, diammonium phosphate (DAP) prices are the lowest they have been in more than a year and a half.

Despite falling DAP prices, India's import of the key fertilzer declined seven percent to 6.87 million tonnes in the April to February period of this fiscal year. The removal of a government subsidy has culled demand of the key farm input. However, outlook remains strong within the government as demand for DAP is expected to grow by four percent to 12.61 million tonnes from the 12.09 million tonnes seen in the 2010-11 financial year.

Junior mining news

Rum Jungle Resources Ltd. (ASX: RUM) recently announced that it has applied to the Northern Territory Department of Resources for a Mineral Lease for its Barrow Creek 1 phosphate resource in Northeast Australia. Discovered in October 2010, Rum Jungle's Barrow Creek 1 deposit was recently assessed to have a total JORC resource (inferred and indicated) of 253 million tonnes at an average grade of 15 percent P2O5 and a total resource of 97 million tonnes at an average grade of 18 percent P2O5 (inferred and indicated).

Exploration company Minbos Resources Ltd. (ASX: MNB) recently upgraded 253.8 million tonnes of its global resources to 12.6 percent phosphorus at its Angola-based Cabinda project. The upgrade improves the company's initial global inferred resource of 304 million tonnes at 11.5 percent phosphorus.

The verification of the resource upgrade will facilitate the conversion of 25 million performance shares in Minbos to ordinary shares.

Agrium Inc. (TSX: AGU) subsidiary Utah Phosphate Co. met with local community members in Uintah County, Utah to discuss the feasibility of phosphate production on recently purchased leases northwest of Vernal, Utah. While comprehensive feasibility studies have not yet been conducted on the company's newly-acquired land, the community gathered to list a number of concerns around potential impacts to water supply for local residents.

It will likely take up to a decade for production to hit full swing on any of the sites, but Utah Phosphate will continue community outreach and testing to determine whether these sites carry value and resources significant enough to warrant production.

 

Securities Disclosure: I, James Wellstead, hold no direct investment interest in any company mentioned in this article.

Phosphate Market Reality Check from Potash Investing News

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