A record number of attendees, with a total topping the 200 mark, were on hand at the 2009 Fertilizer Outlook and Technology Conference, held in Tampa Oct. 28-30, to hear several speakers give their outlooks for 2010 and beyond.
After an 18-month roller coaster of high and low prices, many were looking for – and predicting – a return to normalcy for the coming year. On the often-discussed acreage front, Rich Pottorff of Doane Advisory Services said corn acres should be up next year, to 86.4 million, and they should continue to grow to 90 million in 2012. He noted that the world has added some 50 million corn acres in the past ten years, with 7 million of those being in the U.S., and China contributing some 6.9 million acres.
Ethanol should continue to be a positive factor for corn, with some 5 billion bushels expected to be consumed for ethanol in 2012-2013, versus about 3.7 billion in 2008-2009. Pottorff noted that while ethanol producers have had hard times in the recent year, many of them are now back to making reasonable profits.
One near-term boon to corn prices would be the early frost in mid-October that Pottorff estimates took some 150 million bushels off the market. Further corn loss could come during the late harvest, which Pottorff says could be the latest since USDA began keeping records in 1974. Still, Pottorff said he was not as bullish as the current futures market. He projected that farmers could net some $297 and $282 per acre from corn and soybeans in 2010.
Pottorff sees soybean acreage moving up to 77.7 million acres next year, up from 2009’s 75.7 million. He said the added soy acres could come from wheat acres, which are expected to see a decline from 2009’s 63.1 million acres to 59.8 million in 2010.
Pottorff also noted the dismal performance of cotton in recent years, which has dropped from some 15-16 million acres down to an expected 9.1 million acres in 2010. However, he said a late harvest, flooding, and quality issues could boost acreage next year if prices increase.
Overall, acreage for the 21 major crops should be up by 1 million acres in 2010. He said that some 3 million acres will be exiting the Crop Reserve Program, with some 76 percent of this in only nine states, mainly the Plains states, with some in Nebraska and Iowa.
While 2009 farmer income took a big hit, dropping to $70 billion from 2008’s $97 billion, Pottorff noted that the biggest hit was to livestock farmers. Lower farm income and the events of the past year may keep farmers cautious, noted Pottorff, especially since many of them will see a bumper crop and that things worked out fine without optimal fertilizer application rates. He said some farmers will go back to normal applications, but others cut rates in 2009 and had a good crop, so they may try that another year.
Despite the normal citation of acreage amounts, J.R. Simplot Co.’s John Malinowski, who gave the phosphate outlook, said that application rates trump acreage. He also said that long term, economics will prevail. Citing the first three quarters of 2008, he said Central Florida phosphate was having “The Party.” The fourth quarter brought “The Hangover.”
Malinowski said that the industry is destocked at all levels – manufacturer, pipeline, and farmer’s field. Since there is expected to be a good corn crop this year, he said the fertilizer salesman may have a tough sale in 2010; however, he said in the long term, farmers are still depleting their soils. Net net, he said if they do not buy in 2010, they will in 2011. He noted that phosphate removal exceeds use in much of the Cornbelt. He said that India was a bright spot for phosphate in 2009 due to their subsidy program, and expects India and also Brazil to see increased imports in 2010. He cited an IFA projection of a 5.9 percent phosphate growth rate in 2010, with an expected 2.5 percent growth rate though 2014.
Agrium Inc.’s Jason Newton said global urea trade in 2010 should be up 5 percent, with India continuing to pull more product. He also expects Brazil to return to more normal levels, as was evidenced by more exports in June-July. He noted that urea use will be increasing in the U.S. and Europe due to NOX abatement in the next few years.
While ammonia saw a drop in industrial use in 2009, Newton expects it to rebound in 2010.
Newton noted that UAN imports into the U.S. are off some 65 percent January-August, and said the market remains cautious due to the new plant in Trinidad. He said that UAN has a sizeable discount to urea, and that as farmers realize this it will lead to more UAN demand.
Excluding China, Newton said the nitrogen balance should remain tight through 2011. He said China will act as the swing player/wildcard, depending on their domestic market conditions and world prices.
In the U.S., Newton said that in the past 20 years, there have never been three consecutive years of decline in nitrogen demand. He expects an 8 percent increase in demand in 2009-2010, getting back to 2007-2008 levels.
Newton also noted the delayed harvest, as well as more favorable corn and soybean prices. He said the status quo is that the pipeline is empty and buyers are uncertain. He said those that are following the saying “don’t be long and wrong,” might ultimately see increased volatility as a result.
Kevin Stone of Natural Resources Canada expects demand for potash to go back to normal in 2010 and continue to increase at the past-decade rate of 2.5 percent per year. He noted that Canadian production dropped some 64 percent in the first six months of this year, but can quickly return to normal levels to meet demand. He noted demand fundamentals of world population growth, arable land per capita on a declining trend, and potash being used directly by so many of the world’s major crops.
Stone noted that despite the economic downturn, the expansion plans of the three Canadian producers are still on track. He also assessed the advancement of potential projects in Canada and around the world. In Canada, he noted that three companies have all applied for mining permits – BHP Billiton, Athabasca Potash Inc., and Potash One. All are awaiting approval; however, he said BHP is poised to start ground freezing in 2010 in preparation to sink mine shafts to build a 4-8 million mt/y mine, which would begin production in 2015.
Globally, Stone noted projects advancing at Potasio Rio Colorado in Argentina, Mag Industries in the Congo, and Allana Resources in Ethiopia. Those already in the works include projects in China, Laos, Russia, and Turkmenistan.
Robert Boyd of PentaSul Inc. detailed the collapse of the sulfur market in the past year. In addition to the general economic downturn, he cited China’s absence from the market in part of 2008 due to the Olympics and then their delay in coming back into the market thereafter. He also cited a huge demand collapse in the U.S. in the fourth quarter 2008, which was a major factor in taking the Tampa price to zero. One saving grace for the industry was the startup of prilling operations in the U.S. Gulf, and Boyd predicted that an export prill price will eventually become the price benchmark for sulfur as opposed to the outmoded Tampa price. Ironically, the Green Markets Price Scan began running a U.S. Gulf export prill price Oct. 26.
Ed Kelly with Wood MacKenzie said natural gas prices should rebound to the mid-$4.00/mmBtu range for an average next year, with not a lot of volatility anytime soon. He said that industrial consumption can recover in the U.S. due to the low price. Kelly added that right now the industry is choking on storage, and that while this should be worked down this winter, it will still be a concern in 2010. He said longer term, gas should fluctuate between $5.00-$6.50/mmBtu, but that it could be another two years before that is sustained. Kelly’s assessments did not include any calculations for the Cap and Trade legislation before Congress. He said that anything that will be bad for coal will be good for gas, and right now the Cap and Trade issue is a moving target as to what will happen.
On this issue, Pottorff said he saw no chance that President Obama would get a bill before December.