With high prices for all major crops, one of the main themes for outlook speakers at the Fertilizer Outlook and Technology Conference in Savannah Nov. 16-18 was the battle for acreage among those crops, particularly corn, soybeans, wheat, and cotton.
Rich Pottorff of Doane Advisory Services gave an agricultural outlook, saying it would be difficult for corn to get to 91-92 million acres as all crops are doing well. Currently, the Doane corn projection for next year is 91 million acres for corn, 77.5 million for soybeans, 12 million for cotton, and 57.3 million for wheat. 2010 acreage by comparison was 88.2 million corn, 77.7 million soybeans, 11 million cotton, and 53.6 million wheat.
Pottorff noted that high prices might put pressure on the government to cut CRP acres, which are currently 31.2 million.
The Mosaic Co.’s Dr. Michael Rahm continued with the same theme, calling the acreage battle a virtual “donnybrook” between the major crops. Noting the lowest corn stocks in modern history, he is betting that corn can get to 92.5-93 million acres next year, saying that it will need to get that high so as to put grain stocks back at the 1-1.2 billion bushel level.
Rahm said there is a lot of speculative money in the markets right now, and that if the herd gets spooked there could be a stampede. However, he said there is a strong case for fundamental strength for agriculture.
Rahm said the fall season saw a “perfect storm” for application, what with an early harvest, good weather, and high crop prices. Rahm, who gave the potash outlook, estimates that 5 million tons of the product will be put down in the first half of the fertilizer year starting July 1 in North America, and another 5 million will go down in the second half. He said the potash industry has been struggling to keep up with peak fall shipments. Bottom line, he said potash would be tight until additional capacity comes online later in the decade.
Worldwide, he said shipments are expected to move up to 55 million mt in 2011, compared to the 48-49 million in 2010 and the 32 million in 2009.
Asked about demand destruction, he said there are no indications of a pull back, especially in light of crop prices.
Jerry d’Aquin of Con-Sul Inc. told attendees that first-quarter sulfur pricing might settle out at $200/lt and stay there for the second quarter, with a lot depending on the spring and summer demand, as well as China’s decision on exports. He does not believe the Ma’aden facility in Saudi Arabia will impact DAP sales in 2011. d’Aquin said sulfur may get back to a less volatile price if the industry puts more infrastructure in place. Regardless, he does not expect pricing to go back to the boring days preceding the 2008 run-up.
Kelly Davey of PotashCorp gave the phosphate assessment, telling attendees that she expects to see the Ma’aden project to produce a little bit in 2011, but for it to be significant by 2013. By 2014, she says demand will catch up with Ma’aden.
Davey expects strong ag prices for the foreseeable future and reduced producer inventories. China’s export policy is a big question mark, and in the end they may get their exports down to 2.5 million mt/y from the expected 3.2-3.3 million mt of DAP/MAP this year.
Davey says a decision by the Chinese on their export tariff could come very soon Dec. 1 and that current thinking is that they may extend their high tariff by two months or have a flat tariff of 30-40 percent.
John Harpole of Mercator Energy Inc. detailed the significant impact shale gas has had on the natural gas industry. He said gas producers are no longer exploring for gas, but manufacturing gas. He said they know where it is, that the winner now knows how to be the low cost provider.
Gas is now so bountiful that Harpole said prices should be flat-to-lower for the next five years. This was good news to the North American nitrogen industry, and some wondered if the industry might even ponder the possibility of building a new nitrogen plant in North America – assuming it could get a guarantee of long-term low prices.
Tom Blue of Blue Johnson and Associates noted the impact of those low gas prices on North American nitrogen producers, showing the huge margins that they are currently enjoying. Blue sees about a 9 percent increase in nitrogen consumption for fertilizer year 2010-11, to 12.9 million nutrient tons, up from the prior year 11.8 million. He said the industry is getting close to getting back to normal.
Blue notes a close nitrogen correlation to crop prices. He said the industry is still not selling forward too much, and that distributors also do not want the forward risk. He said one question is whether the big potash and phosphate runs this fall will impinge on the spring. He sees no inherent shortage of NPK in the spring season.
TFI President Ford West gave attendees a legislative update. Despite recent election results that might curb some initiatives in Congress that TFI has been concerned about, West said an activist U.S. Environmental Protection Agency is marching forward and that TFI would be there to fight them in court if necessary. And fresh in his mind was EPA’s final rule issued Nov. 15 to establish numeric nutrient criteria for nitrogen and phosphorus for lakes, rivers, streams, and springs in the state of Florida (see related story, page 16).
The conference, put on by TFI and the Fertilizer Industry Round Table, saw a slight uptick in attendance, to around 209. Next year the event will be held in St. Petersburg, Fla.