December 20, 2017 / 2:22 AM / 5 months ago

Price spike in sulfur leaves farmers, fertilizer makers sour

WINNIPEG, Manitoba (Reuters) - Phosphate fertilizer producers, including Mosaic Co and Potash Corp of Saskatchewan, are paying the highest prices in two years for sulfur, a key ingredient in their farm products, but farmers are the ones absorbing the extra cost.

A sulphur pile in North Vancouver as pictured across the Burrard Inlet from Vancouver, B.C., Canada December 18, 2017. REUTERS/Ben Nelms

Higher sulfur costs, the result of tight global supplies and strong Chinese demand, come as fertilizer makers struggle against a crop price slump that has diminished farmer buying power and as new global phosphate supplies come on stream.

The spike in thinly traded sulfur caused “a bit of pandemonium,” as it is a byproduct of oil and gas output, making it difficult to fill shortages quickly, said Andy Jung, director of market and strategic analysis at Minnesota-based Mosaic.

Mosaic and Potash, among others, convert bright-yellow sulfur into sulphuric acid to make diammonium phosphate (DAP), a widely used phosphorus fertilizer.

While crucial for fertilizer, sulfur is a small, niche product for energy producers that they remove from oil to prevent acid rain-causing emissions. Potential beneficiaries of higher sulfur prices include producers Teck Resources, which declined to comment, and Suncor Energy, which did not respond.

Mosaic and Potash are paying $110 per ton for sulfur this quarter, up $36 from last quarter, BMO analyst Joel Jackson said.

A sulphur pile in North Vancouver as pictured across the Burrard Inlet from Vancouver, B.C., Canada December 18, 2017. REUTERS/Ben Nelms

In response, fertilizer companies have increased DAP prices. It sold at Tampa, Florida for an average $385 per ton last week, up 21 percent year over year, according to Mosaic.

Potash declined comment.

Higher fertilizer costs come as North American farmers are already financially stressed.

“If they get too high, guys will just cut back,” said Todd Lewis, president of Agricultural Producers Association of Saskatchewan.

Slideshow (4 Images)

In the past two weeks, Chinese sulfur prices have declined rapidly from their highs in typically volatile fashion, offering some relief, Jung said. Even so, Jackson expects contract sulfur prices in the first quarter of 2018 to exceed fourth-quarter prices.

Despite high prices, some sulfur producers hold large stockpiles.

About 10 million tonnes of sulfur sit at Syncrude’s oil production site in northern Alberta, big enough to be visible from space, said a sulfur industry official not authorized to speak publicly.

Moving it is an expensive, time-consuming process, requiring sustained high prices, the source said.

Syncrude spokesman Will Gibson said sulfur marketing decisions are up to its joint venture owners.

One of the owners, Imperial Oil, declined to comment.

For sulfur producer Canadian Natural Resources, an Alberta-based oil and gas company, revenue from the substance represents only a small share of its portfolio, spokeswoman Julie Woo said.

Reporting by Rod Nickel in Winnipeg, Manitoba

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