At least three recent developments make CF Industries Holdings Inc.’s chairman, CEO, and president Stephen Wilson even more confident about the second quarter and the year than prior forecasts.
“First, North American natural gas prices have fallen meaningfully over the last 12 months,” said Stephen Wilson, speaking to analysts May 7. “Our previous forecast assumed an average cost of $5.05/mmBtu at Henry Hub over the course of 2010. Right now, December is the only month on the NYMEX DRIP for the remainder of the year with a price of $5.00/mmBtu or more.
“Second,” continued Wilson, our confidence has increased that corn plantings will meet or exceed the USDA estimate of 88.8 million acres because of favorable farm-level economics, excellent planting conditions across the Midwest, and the incentive to plant corn in other major growing regions.
“And third, we have much more confidence around spring nitrogen application rates because of the blockbuster pre-plant anhydrous ammonia season we had in April,” he added. “Our production mix among nitrogen fertilizer products is very balanced, and good ammonia pre-plant application plays to our competitive advantage in the Corn Belt storage and distribution capability.”
Wilson said that in April CF delivered more ammonia than in any other month since it became a public company, and over 70 percent more than the average of the previous five Aprils. In addition, ammonia shipments for the legacy Terra Industries Inc. operations were also greater than for any month over the same time period. “We’re working hard to re-supply our system for sidedress application, and it could be a welcomed challenge to restock our terminal system fully by the fall.”
Wilson cited stronger industrial demand, which was evident from Terra first-quarter volumes.
While corn prices remain under scrutiny, Wilson noted that corn exports are expected to remain strong and that Chinese purchases of U.S. corn may drive exports higher than expected. He said December corn futures prices continue to be in what CF considers to be the optimal range for its business.