Fertilizers are a key component and complimentary in the production of many agricultural commodities. In fact, fertilizers trade as commodities themselves, often in the physical markets. Many large commodity-trading companies have fertilizer departments that buy and sell the commodity in bulk around the world.

Fertilizers can be organic or inorganic substances. They supply one or more nutrients essential to the growth of plants when added to soil.


The three major types of fertilizers are nitrogen, phosphorous and potassium. Specific fertilizer products include granular urea, urea ammonium nitrate (UAN), diammonium phosphate (DAP) and Potash. Mined and manufactured salts that contain potassium in water-soluble form are potash. The word potash derives from "pot ash" which literally means plant ashes soaked in water in a pot.

Some of the companies in North America whose primary business is the production and sales of fertilizers are The Mosaic Company (Symbol: MOS), Potash Corporation of Saskatchewan, Inc (Symbol: POT) and Agrium Inc. (Symbol: AGU).

Around the globe the largest producers of fertilizers are China, Russia, Ukraine, India, the US, Indonesia and Trinidad. As the demand for food increases around the world due to basic demographics (population increases) so does the demand for fertilizers. The largest consumers of fertilizers are the countries that need to feed the largest populations. China, India, the US and Brazil are the dominant consumers, and in most cases importers, as they are the most populous nations with the greatest amount of arable land for growing crops.

A cartel in fertilizers- case study

Two major groups controlled two-thirds of the world's potash supplies until 2013. These groups, a North American coalition including Mosaic, Agrium and Potash and a European group that included Russia's Uralkali and Belarussia's Belaruskali operated as a cartel. For many years this cartel, which operated as OPEC does in the oil market, sought to keep prices for potash high. It was a case of the producers controlling the price and the consumers paying the piper for many years. Under the control of the cartel, potash prices remained high from 2003 through 2013, until things suddenly changed. The cartel was able to take advantage of rising prices for agricultural crops and increasing demand for better food in emerging markets including China, India and Brazil. The high price led to farmer's seeking alternative methods to fertilize their crops and tough price negotiations from the world's largest consumer of potash, China.

In 2013, Uralkali, which controls 20% of worldwide potash production, suddenly pulled out of the European cartel promising that they would flood the market with potash and push the price 25% lower. Uralkali decided to abandon the cartel because they did not believe other members would hold a tough line against the Chinese buyers. Uralkali, the largest producer, was in a position to survive lower prices. They may have believed that a sudden price decrease would either force other cartel members out of the potash business or cut production of the fertilizer. New production was coming on line at the time of Uralkali's action and the price of potash had dropped from over $800 per ton in 2009 to just under $400 in 2013. Since the breakup of the cartel, potash prices have fallen further to under $300 per ton. The breakup of a cartel, in this case, resulted in lower prices for the commodity they previously controlled.

There are no futures contracts available in fertilizers. However, the Chicago Mercantile Exchange (CME) offers swaps in fertilizers. Swaps are principal to principal transactions where parties exchange a fixed for floating price on an asset or commodity, in this case certain fertilizers. The CME posts and monitors these swaps through its clearing mechanism. Therefore, there is data on these swaps on the CME website as well as via fertilizer trade association's websites and through the United States Department of Agriculture. There is an Exchange Traded Fund (ETF) in this sector; SOIL is the Global X Fertilizers/Potash ETF.

Fertilizer prices are often a function of agricultural crop prices. Falling grain prices in 2014 have resulted in continued weakness in the price of fertilizer products.