PotashCorp Executive Vice President and CFO Wayne Brownlee told attendees at the Credit Suisse Chemical Ag Science Conference last week that the drought in Russia and problems in other parts of the world are moving commodity prices for most key crops well above their 10-year averages, and quickly causing concerns about food inflation.
“Coffee is now more than double its 10-year average,” said Brownlee. “Sugar and palm oil are 70 percent above the average. Prices for corn, soybean, and wheat, key North American crops, are around 40 percent above the 10-year average. This is creating a very positive environment for our farmers, and we believe a strong incentive to maximize crop production.
“They’re going to be able to get the crop off early this year because it was in the ground early and it matured quickly, and so they’re going to have lots of time to replant for the fall season, and that is showing up in a fair bit of enthusiasm and exuberance that we’re seeing through our dealer network.”
Brownlee noted the U.S. Department of Agriculture’s Sept. 10 projection of 2010-2011 corn prices at $4.40 per bushel, based on expectations of the U.S. corn crop stocks-to-use ratio declining to the lowest level since 1995. “With this price assumption, U.S. corn farmers are expected to generate record returns this year, and we believe this will lead to strong applications starting with the fall planting season.”
Brownlee noted that the world population has gone from 4 billion in 1970 to near 7 billion today and is growing at a rate of 75 million per year, with much of this happening in China and India. He added that these two nations are expected to see big annual increases in GDP – China at 9 percent, and India and other Asian countries at 7 percent.
As for potash, Brownlee said China has been buying in recent months, and PotashCorp expects the country to re-engage at much more significant levels in 2011.
Brownlee declined questions about BHP Billiton’s offer to acquire PotashCorp.