There have been numerous reports of an impending crash in the price of monocalcium phosphate of late. But given the growing demand for food, is it really likely that the price of MCP will fall?
World renowned experts such as Juan von Gemet, one of the principal consultants at CRU Group, stated recently that he foresees much weaker prices for phosphate products. He is not alone. Many in the animal feed sector also envisage a price drop in the short to medium-term, such as industry journal FeedNavigator, which recently reported that, “The inorganic feed phosphate (IFP) market is suffering due to multiple factors including over-capacity, low feed demand, the rise of substitute products, and growing environmental concerns.”
These thoughts are supported by expected drops in beef prices in US markets. As the American industry journal CattleNetwork, reports, “Profits will be harder to find for cattlemen in 2017, but there will be opportunities. That’s the consensus of economists who see an industry struggling to cope with increasing supplies, volatile markets, and meddlesome regulations.”
John Nalivka, president of Oregon-based Sterling Marketing, is even more precise in his outlook for cattle prices, stating that, “in 2017 I’m projecting a loss of $21 per cow.” This low forecast is despite his prediction that, “feed costs will go down sharply.”
Contrary to short-term slump predictions, are predictions of long-term gains.
In a recent interview with the industry journal, FeedInfo, Zorica Popovic, General Manager of the Elixir Group, a key player in animal feed phosphate markets in Europe, said, “We do not see any significant obstacles that can have a negative impact on the growth of consumption of IFP in Europe. Consumption of IFP in South East Europe has its variations related to shifts in volume of livestock production. Those are more or less seasonal, and are affected by fresh meat price fluctuations, which is characteristic for developing markets. Even the trends we are seeing with regard to the use of phytase in the coming years will not significantly affect the current volume of consumption of IFP in South East Europe.”
She similarly down-played future threats to the market, when she said, “In the long term, alternative sources of phosphorus, and technology for its processing, are inevitable because of limited phosphate reserves. If the use of alternative sources of phosphorus is going to increase, this could have a certain impact on the decrease of phosphate ore prices, but at the same time, it would cause increases in alternative raw material prices.”
She continues by optimistically adding that, “The competitiveness of alternative and low grade raw materials also depends on the price of phosphate ore, which has been low in recent years. In a high price environment, competition exists. But in case where low price levels prevail; competition is reduced.”
This long-term optimism is supported by analysis from MarketResearchReport, which states that, “The global monocalcium phosphate market has seen remarkable growth over the past few years, and it is expected that the market will keep on expanding during the forecast period. The growing [number of] applications [for monocalcium phosphate] is resulting in increased demand across the globe.”
The study continues by outlining the healthy growth that is expected for the sector, declaring that, “World consumption of monocalcium phosphate (29% of the world total) is forecast to grow at an average annual rate of 2.5% during 2015–20. Growth will be led by China at about 7% per year during 2015–20, followed by Other Asia (about 3.5% per year), Africa and the Middle East, the United States, and Central and South America.”
Meanwhile, analysis of MCP markets by industry consultants IHS, confirms a comfortable rate of growth, stating, “Consumption of feed-grade calcium phosphates is forecast to grow at 2.0% annually during 2015–20, led by China at 4.6%, Africa and the Middle East at 2.5%, and the United States at 0.9%.”
So what can animal feed manufacturers and traders make of these conflicting opinions? Is there to be a short-term drop in MCP prices, or are the predictions of steady market growth closer to the truth?
The fact is, the monocalcium phosphate market is a complicated one. While there is a great deal of secrecy among phosphate suppliers and agriproduct producers, there is also great desire for cooperation and mutual assistance to make improved animal feed.
Overall, while the number of phosphate handling facilities is due to increase in the next few years, increasing supply, their is still good reason for prices to remain buoyant. Long-term population growth and increased global wealth, especially in emerging economies such as India and China, give good cause for stable and/or increased demand for MCP.
As Popovic says, “Overall, we believe that changes in the market are less likely in the near future, and on that basis, we do not expect a significant shift in the feed phosphates market in the next few years.”
Or can anyone really be that certain about monocalcium phosphate prices?