OREANDA-NEWS. The US phosphate market faces limited upside in the second half of 2016 as potentially weaker fall domestic demand may be partially offset by increased offshore demand from India and Latin America.

The US phosphate market enters the second half of 2016 in the midst of a small rally, with prices supported by low inventory levels caused by the recent lack of imports. But the rally's duration could be short-lived as forward fourth quarter paper offers remain below $300/st fob Nola. Forward prices have been influenced by at least five incoming import vessels arriving in August and September, as well as bearish crop prices.

DAP barge prices have risen to $315/st fob Nola, up by about $15/st from the five-year low seen in July, because of tighter supply. Overall, the US DAP barge market has been flat, trading in the $300-$320/st range over the last 12 weeks.

Weak crop prices and the prospect of bumper corn and soybean crops could impact US phosphate demand for the fall application season. New-crop corn prices have fallen by $1.15/bushel to the mid-$3.30s/bushel over the last month as favorable growing conditions in the Corn Belt. November soybean futures have dropped by 17pc since June to the $9.80s/bushel. While large crops will demand that farmers replace nutrients to the soil, the low return on the crop could likely delay those decisions into the start of 2017.

Domestic producers are looking to the international market for added support.

Export demand could significantly improve over last year with projected increases to crop areas in Brazil and Argentina, and India returning to normal crop production after a productive monsoon season. The US Department of Agriculture (USDA) estimates that Argentina's 2017 corn acreage will improve by 17pc to 10.4mn acres as the county moves to take advantage of the lifted tax levies. The USDA expects Brazil's 2017 soybean acreage to improve by 3mn acres to 84.5mn acres.

The US phosphate market spent most of second quarter 2016 at a notable discount to other markets, discouraging imports. Brazil MAP prices have traded at a premium to Nola MAP since May.