Fertilizer prices are rising ahead of grain as expectations for a strong to super El Niño in 2026 continue to build, according to an article by Wan Zhou published by Wall Street Insights and carried by PANews. The article argues that the current move in fertilizers cannot be reduced to a simple chain of El Niño, sharply higher grain prices and then higher fertilizer prices. In its view, urea, phosphate and potash are already being repriced on supply, trade, shipping and resource constraints even before staple grains have posted a broad-based rally.
Weather risks are increasing, but the first agricultural effect is selective rather than universal
The article says El Niño in 2026 has moved from meteorological forecasts into real-world impact. Since June, sea surface temperatures in the central and eastern equatorial Pacific have kept rising, pushing market expectations higher for a strong to super El Niño to take shape in the fourth quarter. The main impact window is seen falling in autumn and winter 2026 and extending into early 2027.
Signs of disruption have already appeared. India’s monsoon has weakened, rainfall has been insufficient in parts of Southeast Asia, Europe has seen high temperatures, and southern China has been hit by heavy rain. Still, the article says a super El Niño does not automatically translate into a global food shortage because crop distribution, inventories and policy act as buffers.
Historically, products such as natural rubber, palm oil and cocoa, which are concentrated in specific producing regions and are sensitive to water conditions, have been more exposed to sustained supply shocks. More globally planted crops such as soybeans and corn have cross-regional substitution, and some parts of South America may even see higher output if rainfall improves. China’s corn and wheat have relatively high self-sufficiency, while prices are also shaped by policy, inventories and domestic supply-demand management.
That is why the piece describes the current backdrop as closer to structural agricultural inflation. Weather-sensitive crops may gain a risk premium first, while staple grains still need confirmation from actual yields, inventory levels and trade data.
Grains have not risen across the board, but fertilizer has entered its own cycle
Urea is presented as the clearest example of that divergence. Apparent urea demand rose about 7.2% in the first half of 2026, with growth at 7.8% from January through April. After taking hidden inventories into account, actual demand growth may at one point have reached 8% to 10%. During the spring planting season, producer inventories fell to about 570,000 tons by mid-May. A pricing advantage versus phosphate and potash fertilizers, along with better grain price expectations, also lifted farmers’ willingness to apply fertilizer.
Conditions began to turn in the second half. Agricultural demand moved into a seasonal lull, production of high-nitrogen compound fertilizer had already been brought forward, and industrial demand was not expected to provide fresh elasticity. On the supply side, another 5.11 million tons per year of urea capacity was expected to come online in the second half. Total annual capacity additions were estimated at about 6.45 million tons per year, while full-year production was projected at about 78.10 million tons, up 7.86% year on year.
The article says the central issue for urea has therefore shifted away from domestic farm demand and toward whether exports can absorb the additional supply. By late July, domestic urea output was around 215,600 tons per day, while producer inventories had climbed to about the 76th percentile of the past three years. Over the same period, granular urea in the Persian Gulf was priced at about $445 per ton, equivalent to roughly RMB 3,021 per ton, versus a domestic average near RMB 1,747 per ton. That left a theoretical spread of more than RMB 1,200 per ton.
The article adds an important caveat: a price spread is not the same as realized profit. China exported 4.89 million tons of urea in 2025, but only 503,600 tons in the first half of 2026. Export quotas, guide prices, India’s tender volumes and the real capacity of overseas buyers to absorb cargoes will determine whether the urea move is only a short pulse or the start of a more durable recovery.
Phosphate is moving into an unusual availability-led cycle
The article is more constructive on phosphate over the medium term. It says tightness in the overseas phosphate market has gone beyond a pure cost story. Companies including Vietnam’s Vinachem and Lithuania’s Lifosa plan to cut phosphate output because of sulfur shortages. Shipping risks in the Red Sea and the Middle East have also reduced effective supply.
One example cited in the piece is diammonium phosphate shipped from Yanbu in Saudi Arabia to India. If vessels must reroute around Africa, freight costs rise by about $50 per ton compared with the traditional route. Even if passage through the Strait of Hormuz normalizes, reduced plant operating rates caused by feedstock shortages cannot be fixed immediately. In that setting, the market begins to move away from cost-based pricing and toward availability-based pricing.
China remains central to the global phosphate supply system. In the first half of 2026, China exported only 112,600 tons of monoammonium phosphate and 73,900 tons of diammonium phosphate, down 56.2% and 87.7% year on year. Exports of calcium superphosphate reached 291,400 tons, down only 3.1%. The article says the contraction was mainly tied to domestic supply-protection policy.
With spring planting over and winter stockpiling not yet under way, domestic demand is in a seasonal trough. That makes marginal changes in export policy a direct earnings catalyst. The article highlights a spread dynamic it thinks the market may be underestimating: overseas buyers are short of product, China has the production base, but exports are constrained. If smaller products such as calcium superphosphate, which are less sensitive in domestic supply-protection terms, gain export flexibility first, integrated producers with phosphate rock resources, sulfuric acid support and overseas channels could see much stronger profit elasticity than ordinary manufacturers.
Potash looks more like a classic resource cycle
Potash supply constraints are described as more straightforward. The article says maintenance at Russia’s Uralkali in the third quarter is expected to reduce granular potassium chloride output by 300,000 to 400,000 tons. Belarusian Potash Company is expected to produce 500,000 fewer tons in the second half than a year earlier. Taken together, the disruptions amount to nearly 800,000 to 900,000 tons.
Because global potash resources are highly concentrated and new mines take a long time to develop, shifts in ore grade and maintenance cycles at existing mines can directly affect marginal global supply. At the same time, China’s domestic potassium chloride market in July still showed a strong-supply, weak-demand pattern. High-priced cargoes were hard to move, and holders cut prices to reduce inventories.
The article says those two realities can coexist. Weak spot conditions in the short run reflect the off-season and stock levels, while shrinking international supply shapes the medium-term price center for a resource product. If El Niño later lifts prices for palm oil, sugar and other high-value crops, potash demand elasticity may prove more direct than for staple grains.
El Niño may matter most for 2027 demand, not the current rally
On the article’s reading, El Niño has made only a limited direct contribution to the current fertilizer move, but it could materially change the distribution of demand in 2027. Fertilizer use is tied to planted area, yield targets and planting returns. When crop prices rise, the potential gain from each added unit of fertilizer rises as well. Extreme weather can also strengthen the incentive to protect yields.
That creates a transmission path from crop prices to planting returns, then to fertilizer application and later to channel restocking. The article also flags a two-way feedback loop. Higher fertilizer and energy costs raise farming expenses; if farmers cut application rates, yields can suffer further; if grain prices then rise, fertilizer demand may recover again.
The scenario that could push the sector into a second phase would require several factors at once: persistent extreme weather, falling grain inventories, high energy costs and tight fertilizer supply. Only then would today’s mostly supply-led rally have a chance to become a full supply-demand resonance.
Food security is reshaping the sector’s strategic role
The article argues that reading the current fertilizer rally purely through the El Niño lens overstates the weather effect on short-term pricing. A bigger medium-term shift is that food security is redefining what the fertilizer industry represents. For policymakers, fertilizer is both a farm input cost and an essential tool for stabilizing yields. The objective is not simply high fertilizer prices, but controllable strategic resources, stable domestic supply and dynamic adjustment between local supply protection and exports.
That policy ranking was already visible in the first half of 2026 through the sharp contraction in phosphate exports and the constrained pace of urea exports. From that angle, the sector’s investment logic can be split into three layers: food security sets the strategic status and policy floor, global resources and supply patterns set the earnings center, and El Niño plus higher agricultural prices determine upside elasticity in the cycle.
The article separates the three major fertilizers clearly. Phosphate and potash carry stronger resource-security characteristics. Urea depends more on the domestic capacity cycle and export management.
Phosphate: resource value and export elasticity stand out
Among the three major straight fertilizers, the article says phosphate still has the most complete medium-term case. Upstream phosphate rock takes a long time to develop, while new mining rights, safety and environmental rules, and resource controls limit expansion. Overseas phosphate supply is also under pressure from sulfur shortages, plant cutbacks and shipping disruptions in the Middle East.
At the same time, China’s exports of monoammonium phosphate and diammonium phosphate in the first half of 2026 were only 112,600 tons and 73,900 tons, down 56.2% and 87.7% from a year earlier. Domestic supply protection clearly took priority over exports.
The article describes this as a double constraint under the food security framework. China needs sufficient phosphate supply and reasonable domestic prices, which limits full market-based exports. But China is also a major global phosphate supplier. If overseas shortages persist, the domestic-overseas spread can keep widening, and even modest policy easing could release significant profit elasticity.
With domestic phosphate demand now in a seasonal low between spring planting and winter stockpiling, supply-protection pressure has eased from spring levels. Smaller products such as calcium superphosphate, where domestic consumption is less dominant, may show export elasticity earlier than core supply-protection categories such as monoammonium phosphate and diammonium phosphate.
Over a longer horizon, the article says phosphate companies should no longer be judged only by fertilizer price times sales volume. Firms with phosphate rock, sulfuric acid and synthetic ammonia support, phosphate fertilizer capacity and links to new energy materials span food security, resource security and materials demand at the same time. Integrated resource players may therefore deliver steadier earnings than standard cyclical manufacturers.
Potash: one of the purest food-security resource trades
The article goes even further on potash, calling its food-security character more direct than phosphate. China can be largely self-sufficient in urea, and it has a solid phosphate rock base. Potash is different. Global potash resources are highly concentrated, new mines take years to build, and China’s domestic endowment is limited. That makes potash both an agricultural necessity and a resource-security issue. Improving domestic potash security and expanding overseas potash interests are, in the article’s framing, part of the food-security system itself.
Fresh marginal changes have already appeared on the supply side. Third-quarter maintenance at Uralkali is expected to cut granular potassium chloride output by 300,000 to 400,000 tons, while Belarusian Potash Company is expected to reduce second-half output by 500,000 tons year on year. With global supply this concentrated, a disruption of roughly 800,000 to 900,000 tons can carry real weight in marginal pricing.
Short-term weakness in China’s domestic market because of off-season inventory pressure does not alter that medium-term resource case, the article says. The lower bound for potash prices is set more by supply concentration and scarcity, while agricultural prosperity shapes the upside. If El Niño pushes up prices for palm oil, sugar, rubber and some grains, stronger planting returns for high-value crops could improve both farmers’ ability and willingness to apply potash.
The article sums up potash as an asset where food security provides the long-term logic, resource constraints provide the price floor, and agricultural strength provides upside optionality. The key metrics are resource volume, low costs and the ability to deliver new capacity.
Urea: domestic supply protection matters more than resource scarcity
Urea also sits inside the food-security framework, but its investment profile is different from phosphate and potash. China’s coal-chemical system gives the country strong self-sufficiency in urea, so its strategic role is expressed more through stabilizing domestic supply and balancing global markets than through scarcity value.
Demand was firm in the first half of 2026, with apparent demand up about 7.2% year on year and January-April growth at 7.8%. After including hidden inventories, actual growth may have been 8% to 10%. But the article notes that this strength also reflected factors such as front-loaded spring planting demand, urea’s pricing advantage over phosphate and potash, melamine exports and some disguised exports.
The second half presents the opposite pressure. The article cites Dongzheng Futures as expecting full-year urea demand growth to slow to about 5%, below the projected 7.86% increase in annual output. That leaves exports as the key variable. International prices remain far above domestic levels, and India still has strong import demand. If export quotas and actual shipment flows increase, they could ease domestic oversupply and allow Chinese coal-based urea producers on the left side of the global cost curve to benefit from higher overseas prices.
Even so, food security means export policy must continue balancing corporate profit, overseas markets and domestic supply protection. Export headroom cannot be treated as identical to the theoretical price spread. That is why the article sees urea more as a high-beta trade than the most stable medium-term allocation among the three fertilizer segments.
The article’s bottom line: 2026 is about supply constraints, 2027 may be about whether demand takes over
The piece concludes that food security may become a more durable medium-term theme for the fertilizer industry over the next several years than El Niño itself. It strengthens the strategic importance of upstream resources such as phosphate rock and potash, while making domestic supply protection, export policy and industrial integration major variables in corporate earnings.
In that framework, what the market is trading in 2026 is first resource constraints, geopolitical conflict, overseas supply and domestic-overseas price spreads. What El Niño may decide is whether demand can take over in 2027. If agricultural prices spend the next six months pricing in weather-driven production risks more fully, the fertilizer sector could go through a second change in logic: phosphate could move from a resource-and-export story into simultaneous supply and demand tightness, potash could move from a resource cycle into resonance with agricultural strength, and urea would still need better demand to offset new capacity.
The article’s final framework is straightforward: food security provides the valuation floor, resource constraints define the earnings center, and El Niño together with grain prices determines upside elasticity.