CF Industries Holdings Inc. has boosted its estimate of corn plantings for 2011 to 92 million acres, up from 91 million acres. CF Senior Vice President and CFO Tony Nocchiero told analysts at the Credit Suisse Chemical Ag Science Conference last week that this would be the second-highest planting in the modern era.
Nocchiero presented slides at the meeting showing what he said were the reasons ag input providers who were seen at the conference “have smiles on their faces. It’s really a great time to be a North American producer of fertilizer, and especially a producer of nitrogen fertilizer.”
Nocchiero said the average expected returns over variable costs are $435 per acre for corn and $308 per acre for soybeans. He added that the company also expects higher winter wheat plantings as well, which should increase fall fertilizer demand.
Fertilizer prices have moved up strongly over the last two and a half months, and strong demand has collided with a tight global supply, said Nocchiero. He went on to tout CF’s network of storage facilities, variety of nitrogen products, transportation cost advantages versus imports – $35-$65 per ton – and North America’s abundant supply of natural gas. On the latter, he compared North American production at $4.00/mmBtu and a 33 mmBtu conversion rate, versus that of swing producer Ukraine at $7.00/mmBtu and a 38 mmBtu conversion rate.
Nocchiero said the company was initially more conservative about prospects for the fourth quarter, thinking there might be some oversupply in urea. However, he said he thinks the market will be much tighter now due to production issues in Russia, Ukraine, and Iran, and strong demand from India, Pakistan, and Brazil, with this being offset somewhat by exports from China.