Diammonium Phosphate Prices Explained
Diammonium Phosphate (DAP) prices regained their track as inventory levels in the U.S. continued to tighten and China announced another export cut to curb the country’s increasing domestic fertilizer prices. Furthermore, additional freight hikes trouble the global market as ships between European suppliers and Asian importers rerouted to the southern tip of Africa to avoid the continuous attack on the Red Sea.
Why are diammonium phosphate prices fluctuating?
1. Demand and Raw Materials
Diammonium phosphate prices rise as farmers increase their purchases to prepare for the spring and summer planting seasons in North America. Additionally, India reported an uptick in DAP prices as the country struggled to soften its domestic prices while looking for alternative imports after China tightened its exports to lessen the country’s soaring fertilizer prices.
2. Sustainability and Environmental Concerns
Environmental concerns about phosphate mining and water pollution prompted the development of sustainable fertilizer production practices. This includes minimizing waste, exploring alternative sources of phosphate, and promoting nutrient recycling through compost and biofertilizers.
Additionally, government regulation on fertilizer use can potentially impact its DAP prices in the market.
3. Other Industry Consumers
While India and South Korea seek to diversify their fertilizer imports from Vietnam, Indonesia, and Saudi Arabia, Brazil (the U.S. fertilizer’s top market in South America) registers its 3-year inflation which diminishes purchasing power.
Additionally, the country’s dry weather made farmers hesitant to book more fertilizer supplies for the next corn planting season. Thus, these different dynamics across global markets show uneven trends and exhibit volatility of DAP prices
4. Fertilizer Alternatives
DAP prices largely depend on the price fluctuations of other fertilizers such as urea, urea ammonium, and potash. Any changes in these fertilizer’s supply, demand, and production inputs will ultimately affect its value. For example, the war between Russia and Ukraine made global fertilizer prices rise by 30%, this highly includes urea, DAP, and urea ammonium.
5. Market Dynamics
The global market dynamics such as trading practices and policies also impact DAP prices. For instance, China’s government placed restrictions on phosphate exports to drive down domestic prices of the fertilizer with its supply.
Moreover, the country started implementing its conservative growth target. This includes capitalizing its assets and reducing its reliance on imports. Overall, such market interventions can influence global prices, including diammonium phosphate.
Which variables impact the price of diammonium phosphate?
- Demand and Raw Materials
- Sustainability and Environmental Concerns
- Other Industry Consumers
- Market Dynamics
- Government Policies
- Currency Rate
Where does diammonium phosphate come from?
Diammonium Phosphate (DAP) is a white, crystalline, water-soluble, odorless, and non-toxic fertilizer compound. It is a popular fertilizer because of its high nitrogen and phosphorus content. Additionally, it is a synthetic compound that is produced by reacting ammonia with phosphoric acid. Here is the detailed process of its production.
1. Formation of Mono-Ammonium Phosphate – The production process begins with the formation of mono-ammonium phosphate (MAP). This is done by reacting 1 mole of phosphoric acid (produced from mined phosphate rock) with 2 moles of ammonia.
2. Formation of Diammonium Phosphate – Then, it further reacts with anhydrous ammonia to form a partially reacted slurry of MAP and DAP. This slurry is pumped to a granulator reactor for further reaction.
3. Granulation – In the granulator reactor, the slurry further reacts with anhydrous ammonia to form a solid granular mixture. The resulting granules have various sizes, including undersize, oversize, and product-sized particles.
4. Drying and Cooling – The mixture is dried in a dryer. After drying, the mixture is divided into two portions. The first portion is fed back to the granulator-reactor while the second portion is sent for classification.
5. Classification – The second portion of the mixture is classified using a set of screens. This separates the mixture into undersize, oversize, and product-size solid granular DAP.
6. Milling and Recycling – The oversized granular DAP is milled along with the undersized granular particles and it is recycled back to the granulator-reactor.
7. Packaging – Finally, the product-sized solid granular DAP is ready for packaging and distribution.
What are the uses of diammonium phosphate?
DAP has several applications due to its high nutrient content and excellent physical properties.
1. Fertilizer – The most common use of DAP is as a fertilizer. It is the world’s most widely used phosphorus fertilizer. The high phosphorus content makes it useful for crops in broad-acre farming, cereals, sugar cane, sowing pastures, dairy pastures, and fodder crops. Moreover, horticultural crops such as vegetable and tree crops use DAP as fertilizer.
As a fertilizer, this commodity has the following benefits:
- Water solubility – DAP is soluble in water which makes it easy for plants to absorb.
- Slightly acidic – Its slightly acidic characteristics help improve the pH of acidic soils.
- Reduced risk of nutrient deficiencies – Its high nitrogen and phosphorus content provides plants with the essential nutrients they need for growth and development, leading to increased crop yields.
- Improved soil health – Additionally, the fertilizer’s nitrogen improves soil health by increasing the soil’s organic matter content.
- Easy to apply – DAP fertilizer is easy to apply. It can be applied to broadcast, banded, or side-dressed. Furthermore, it’s soluble in water so it’s available through irrigation systems.
2. Food and Beverage Production – It acts as a nutritional supplement and buffering agent in food production. Winemaking and mead brewing use diammonium phosphate as a yeast nutrient to improve fermentation efficiency.
3. Fire Retardant – An important element in making fire retardant, it lowers the combustion temperature of the material, decreases maximum weight loss rates, and causes an increase in the production of residue or char. These are important effects in fighting wildfires as lowering the pyrolysis temperature and increasing the amount of char formed reduces the amount of available fuel and leads to the formation of a firebreak.
What is the future price of diammonium phosphate?
Generally, diammonium phosphate prices vary according to its supply, demand, raw materials cost, and global economic conditions. Market analysts and trading analytics websites predict that DAP prices in 2030 will be in the range of $400 to $500 per ton. This modest prediction stems from its unpredictable price movers. These are:
Technological advancements in the industry due to investment for more efficient production processes. This reduces the cost of production which helps keep prices in check. For instance, AI-driven sensors and data analytics in India enable farmers to optimize fertilizer applications based on specific soil conditions and crop needs. Thus, this helps reduce waste and maximize fertilizer efficiency.
The cost of raw materials such as ammonia and sulfuric acid. Ammonia is a key material in its production and sulfuric acid is used to convert ammonia into DAP. If the cost of these raw materials increases, it will lead to an increase in the cost of manufacturing which will in turn lead to an increase in DAP prices.
Organic and bio-based alternatives. The practice of sustainable production reaches fertilizer manufacturing as consumers become increasingly aware of their spending footprints. Additionally, some farmers revive organic farming to mitigate the increasing fertilizer costs, leading to the production of bio-based fertilizers that can potentially stabilize DAP prices.