2024 Fertilizer Outlook: Steady Wins the Race
By Daryl Schuster, President, Keg River Chemical
Our market forecast points to a great year ahead for Keg River customers
In a world that often seems to evolve at light speed, the global fertilizer market stands tall as a remarkably consistent sector. That was the case in 2023. From our vantage point, “steady as she goes” is shaping up as the theme for 2024 as well – including for the Plant Nutrient Sulphur (PNS) market.
That’s good news for Keg River and our customers. The increased stability we saw return last year was a welcome trend following an unusually volatile 2022. A continuation of this ‘return to normal’ for the year ahead will support predictable planning, pricing, supply and results – ultimately benefitting everyone.
Let’s dive in for the details:
Stable costs, stable pricing.
The new year has kicked off to a great start. For the first quarter, we’ve seen the cost of raw materials staying flat with no surprises. As a result, we predict our base price will hold steady and is unlikely to change for the first or second quarter.
If it ain’t broke, don’t fix it.
This consistent and predictable environment fits perfectly with our Keg River pricing strategy, which we expect to maintain throughout 2024.
As many of our customers know, this pricing strategy follows a principle of “trailing average cost” based on the sulfur market. We build our price by using the market price of elemental sulfur as a reference point to establish a baseline. Our initial figure is typically below the market price. From that base, we add a modest value to cover our operation costs and a fair margin. The result reflects a balance of the market and the higher-end quality we offer – giving customers the most bang for their buck possible.
This tried-and-true approach typically changes very little. When applicable, we’ll charge outbound freight on a zone rate that reflects our weighted average costs. Also, to keep traffic flowing efficiently into key areas, at times we will offer a “Freight Allowance” – this helps keep important supplies moving in both directions without hiccups.
Rising demand on the back nine.
Our planning also considers the potential for demand variation over the year. For 2024, we predict a repeat of the same pattern shown in the last two years, where volume tends to start a bit softer in the first half of the year and then ramp up in the second half.
What we saw for 2022 and 2023 was demand during the first half of the calendar (January to June) that was on average eight percent less compared to the second half (July to December). In both years, the second-half volume boosts more than made up for the quieter first half. We expect to see the same pattern in 2024.
Getting ahead of the game.
To get ready, our team already has plans in place to meet the anticipated second-half demand spike. For the fall market, we will increase the amount of product available at our own two warehouses close to headquarters, as well as across our network of affiliate warehouses that are closer to many of our customers.
As with every year, even the most stable, there can be the odd speed bump. But we are well prepared. For example, we expect some increased challenges with distribution possible for October and November. However, we have already planned to address this with a summer fill program. We encourage our customers to pick up early to take advantage of our summer fill program and to ensure adequate supply during the busy fall season.
Keeping supply on track – literally!
For delivery, we continue to strengthen our approach across the board, including a continued rise in rail use, which has now grown to become our year-round “go-to” option to get product where it’s needed.
This makes sense due to the greater efficiency and much greater payload of rail cars, compared to other options. This is an advantage we identified and jumped on early, which has fueled our investment and increased capacity in rail. Today we have 15 of our own rail cars to serve Keg River demand year-round.
Looking good in the big picture.
Overall, the landscape for 2024 bodes well for what we’re accustomed to: No surprises with everything pointing to an efficient and successful year for our team and our customers.
We’re fortunate to enjoy this consistency in most years. It’s interesting to note that with rare exceptions the PNS market has been stable 94 percent of the time.
There have been just two occasions, which amount to six percent over the last 25 years, where the price of sulfur from our suppliers skyrocketed to insane numbers. But these have been short spikes – in both cases, within eight months, prices returned to normal. Those “outlier” years were 2008 and 2022. We don’t expect to see that in 2024.
Good pricing, good value you can bank on.
All these factors add up to a great market environment for the year ahead. We don’t see the cost of sulfur increasing in 2024, so it is unlikely the prices will change unless it has to do with freight. Most important to Keg River and our customers, the value of good PNS is likely to remain high.
Growing together in success.
Overall, we predict smooth sailing and success for Keg River and our customers in 2024.
We appreciate all our relationships, never take them for granted, and look forward to growing stronger together month after month, year after year.
Here’s to a great year ahead!
