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Is it stupid to stockpile food? Should we sign the big contract or not? Author/Source: China Fertilizer Network Date: 2020-04-08 Clicks: 9 Recently, many people have been stockpiling food – rice, wheat flour, and it is said that soybean oil as well. Why? I heard that there were epidemics and locust plagues first, followed by floods and famines. It’s just hearsay; there’s no need to be afraid. What era is this? Hehe... In fact, not many people believe it, but there are plenty of those who take precautions. Food is a necessity; anyway, its price isn’t high right now, and it’s unlikely to get any lower in the future, so it’s better to stock up ； If you have enough, consider buying it in advance – it takes up so little space. If it goes bad, then it’s a waste; after all, how much is it worth? But what if you really run out of it? The principles are all similar; it’s just that the conditions, costs, and degrees of impact vary. In fact, the fertilizer market has always been filled with various rumors and speculation. The most notable issue in the potassium fertilizer market recently has been large-scale contracts. It’s not clear how or where this information came from, but it is said that a major contract for the maritime import of potassium chloride will be signed around the Qingming Festival, or at the latest by April 15th. It should be noted that this is not an official announcement, nor are it the analysis and predictions of experts or laypeople; it is merely a rumor based on the assumption that things will turn out that way. Is the rumor credible? The official authorities remain silent. Analysts have been suggesting that a contract should be signed, or they believe that a signing won’t happen so soon; however, none of this is important. What matters is that the price in Southeast Asia is 230 dollars, and in Brazil it’s 220 dollars. Moreover, the volume of goods available under duty-free arrangements has already exceeded 2.5 million tons. Therefore, once a large-scale contract is signed, the price will surely drop, and the price of potassium chloride will inevitably fall sharply as a result. What if the rumors are true? As a result, demand has weakened rapidly over the past half month, leading to a drop in potassium chloride prices; the price of potassium chloride at ports has fallen by as much as 100 yuan, and even the upward trend in potassium sulfate prices in Mannheim has come to an end. The author previously advocated for early signing; concern over rising prices was secondary, with the main worry being a shortage of supply. However, it’s not yet clear whether demand has dropped again or there is an excess of supply; in any case, we are on track to get through the spring market without any major problems. Based on the consumption rate in the second quarter of recent years, where the monthly import volume of potassium through ports was less than 600,000 tons, the current normal stock levels are already quite low, but they should still be sufficient to last for another two months ； Meanwhile, the pandemic continues to ravage the world, with negative prospects for the economic situation growing worse; large contracts in India have also been delayed, putting severe pressure on the demand for potassium chloride. So at this point, there’s nothing for us to worry about anymore; it’s only the foreign parties who are anxious. Whether a large contract will be signed or not depends on their \"sincerity\". However, we can’t truly be at ease, because not only is there a possibility that it will be signed, but there’s also a possibility that it will be delayed for a long time before being signed! The off-season does not mean there is no demand; as inventory levels remain low and continue to approach zero, the possibility of a market reversal actually increases gradually. Before the Spring Festival holiday, no one could have imagined that this pandemic would spread across the whole country. While we were still mourning the figures of 80,000 and 3,000, the international figures had already exceeded 1.2 million and 70,000 respectively. That’s why ICL closed one of its potassium mines in Spain not long ago. And now that Nutrien has announced that 3 workers at one of its mines have been diagnosed with the disease and are in isolation, shouldn’t we also consider the possibility that there might come a day when it becomes necessary to shut down operations, regardless of whether we want to or not? Are those who hoard food stupid? Those who believe rumors might be foolish, and those who take precautions might not be very smart either. But don’t forget the saying: “It’s always those who can swim who drown!” ”Who is good at swimming? Either it’s those smart people who think they know better and call others fools, or it’s those intermediaries who believe they can control everything! In summary, safety in fertilizer use comes first, followed by the protection of interests; a reasonable price takes precedence over lower prices. The author still hopes that new large-scale contracts can be signed in the near future. The fear of such an outcome will continue to influence the potassium chloride market in the coming period, until a major contract is finally signed. It is expected that until mid-April, the main concern in the market will be the signing of this contract, so price trends will likely remain downward. However, if no contract is signed by mid-April, concerns regarding the availability of supply may increase gradually; at that point, potassium chloride prices could either decline very slowly or experience slight fluctuations (since a contract will eventually be signed, any rebound will be limited, unless there are concrete reasons indicating that signing will be delayed – and that would represent another possible scenario). It is recommended that most players in the industry adopt a cautious approach. Downstream manufacturers engaged in long-term production should at least stock up on raw materials for this month, while those with the means can, depending on their own safety considerations, stockpile raw materials until the end of May. (Adu)