Some 160 industry representatives convened in Banff, Alberta, Aug. 13-15 for the Canadian Fertilizer Institute’s 62nd Annual Conference. The conference’s business session speakers tackled a range of subjects, but the impact of biofuels, global trade, and security were common themes.
“The North American fertilizer industry is doing very well, and we expect to see an increase in the use of our products across the board,” said CFI President Roger Larson in his opening comments. Larson said the industry’s success depends on access to the import/export pipeline, however, and critical transportation issues lay ahead, as do ongoing concerns about safety, security, and the environment.
“Nutrients from every source are facing increased scrutiny,” Larson said, in reference to environmental issues such as runoff and greenhouse gas emissions. “But nutrients from fertilizer will always be the first target.”
Bill Doyle, president and CEO of Potash Corp. of Saskatchewan Inc., also talked of the need to “continue to address big challenges to our industry,” including global population growth, particularly in the developing world; declining agricultural land; more grain needed to feed cattle; high oil prices; record low wheat and coarse grain stocks; and climate change. “If our industry doesn’t meet these challenges head on, it won’t do well,” he said.
Doyle outlined numerous opportunities stemming from these challenges, including continued strong global economic growth; increases in grain and meat production as global diets switch from starch-rich to protein-rich foods; crop uses for aquaculture feed; and “tremendous room for biofuels growth.” Doyle talked of the ethanol boom, noting that more corn will require more fertilizer. “This is the cake, and a rich, moist triple-chocolate cake it is,” he said.
Other plusses for the industry include rising commodity prices and improved fertilization to raise yields, particularly in China, India, and Brazil. “Our world needs more food,” Doyle said, noting a global move to balanced fertilization and higher application rates, as well as a longer-term push to bring more land into production in Africa and Latin America. Doyle said food production must increase 50 percent in the next 20 years to feed a population that will be one-third higher than it is today.
Doyle also touted the Nutrients for Life Foundation’s educational and research programs, which were highlighted at this year’s Southwestern Fertilizer Conference as well. “Everyone in this room is directly dependant upon the success of this organization,” he said. “We need to get the positive message out.” That sentiment was echoed by CFI’s Larson, who noted that Canada is trying to develop its own Nutrients for Life Foundation.
Dr. Michael Rahm of the Mosaic Company painted a rosy economic picture for the fertilizer industry, noting that “production agriculture is revving up worldwide.” Rahm predicted that global grain and oilseed stocks will continue to fall, even 11 months into a robust growth cycle and pricing environment. He said past commodity price spikes were due to supply shocks, but the current rally is due to demand pull. As a result, prices are likely to remain high for the next three years. Rahm also noted rapid growth in key Asian fertilizer markets, as well as stable growth in key Latin American fertilizer markets.
“It’s still largely a food game that we play,” Rahm said, noting that biofuels play a significant role but are not the main driver in the fertilizer market. Biofuels demand will, however, boost grain and oilseed use and continue to have a significant impact on commodity prices.
Regarding the food versus fuel debate, Rahm said the U.S. can support a 15-20 billion gallon corn-based ethanol industry and still meet feed requirements, food uses, and export needs with a 90 million acre corn crop. Noting some 460 biofuels plants either operating or under construction in North America, with a capacity of 7.2 billion gallons, Rahm painted an optimistic forecast for global nutrient demand.
Rahm predicted that corn prices will drop due to the large crop this fall, but still noted a “pretty decent price,” along with fundamental strength in demand. As for other crops, Rahm said oilseed stocks are expected to decline significantly, and new crop soybean prices will remain at high levels. The wheat market is tightening and wheat prices continue to climb, approaching all-time records set in 1996. New crop wheat prices remain at high levels as well, Rahm said, and will affect grower planting plans in the coming months. In fact, Rahm predicted a “battle royale” as crops compete for acreage in 2007/08, with a “little bit of a switch” back to oilseeds and wheat after this year’s big corn push.
In his nutrient demand outlook, Rahm talked of “very positive demand fundamentals” for nitrogen, fueled by record urea imports to India. China remains the wild card, however, and could export between 3.5 and 4 million tons of urea this year. This factor, coupled with new global capacity coming online, will result in significant urea supply available for the North American market, Rahm said, matching the brisk demand outlook with a good supply picture.
Regarding phosphates, Rahm said DAP/MAP stocks have declined to low levels. China remains the key swing factor in the phosphate market as well, he said, noting large DAP/MAP exports from that country that may actually be shorting China’s domestic market. Rahm talked of a rebound in global import demand for phosphates, with big increases in processed phosphate imports – particularly in Latin America. “Brazil is back, and is reinvigorated by higher commodity prices,” he said.
As for potash, Rahm predicted increasingly tight stocks and very strong demand growth, with import demand rebounding to record levels, particularly in China and India. Canadian offshore potash exports have rebounded 53 percent in 2006/07, he said, while domestic shipments have rebounded 24 percent and are projected to increase another 3 percent in 2007/08. Canadian potash production is also projected to increase to record levels in 2007/08, he said.
The conference also featured several open house panel discussions, including one by Canada’s Fertilizer Safety and Security Council that produced some pointed exchanges between certain panel members and attendees. “There will be security requirements; that’s an absolute,” said John Read, director general of TDG (Transportation of Dangerous Goods) for Transport Canada, a government department charged with developing transportation-related regulations and policies.
Responding to a question about the potential economic burden of security regulations for the fertilizer industry, Read said the regulatory authorities “are written to be as flexible as possible.” He cautioned, however, that the industry needs to get involved and actively participate as the regulations are formulated. “Security has this huge potential,” he said. “It’s staring you in the face, and has the potential to strike you really hard. You really should be doing your homework.”