Weather Conditions
Favorable weather conditions, such as adequate rainfall and optimal temperatures lead to healthy crop growth and higher yields. High crop yields increase the demand for potash and other fertilizers, putting upward pressure on prices due to increased demand.
However, climate change causes shifts from the demand side. For instance, the warmer temperatures in most agricultural countries hinder farming activity, resulting in low global demand. Thus, the commodity’s marketability largely depends on the fluctuating weather systems.
2. Geopolitical Influences
The Russian invasion of Ukraine has a huge impact on the fertilizer industry. Russia is the second largest potash fertilizer producer and international sanctions from the West didn't spare this commodity. Additionally, the U.S. UK, and Europe imposed fertilizer sanctions on Belarus (a close ally of Russia and the 4th largest potash producer).
Furthermore, the tightened Chinese (3rd largest producer) export policies significantly influence the fertilizer supply chain. Thus, these compounding factors control the fluctuating potash prices.
3. Production Costs
Nitrogen is an essential element in producing most fertilizers. High input costs, OPEC and OPEC+ oil production reduction policy, and the diminished manufacturing capacity in Europe all point to the rising production inputs. Thus, changes in energy prices directly affect the selling price of fertilizers.