2014 corn acreage looks good, inputs challenged, says economist; fertilizer conference sets record attendance
The good news from the Fertilizer Outlook and Technology Conference last week is that 2014 U.S. corn acreage should be around 94 million acres, according to Rich Pottorff, Doane Advisory Services chief economist. The bad news was that the U.S. market for fertilizer, corn seed, and pesticides is going to shrink – and probably pretty significantly, he noted, saying that corn production profits will get slim and farmers will be more cost conscious and likely to cut back on inputs.
2013 corn acreage was 95.3 million acres, according to recent USDA projections (GM Nov. 18, p. 14), down from earlier assessments of 97.2 million due to a wet spring. U.S. growers are expected to produce a record 14 billion bushels in 2013, which will boost corn stocks and keep pressure on corn prices.
Corn demand will need to grow in order to sustain large acreages, with exports being the likely way, as ethanol growth has leveled off. Pottorff said currently some 88 million acres is “needed,” and he expects planted acreage to trail off to 90 million acres in 2015. Pottorff, like others speakers at the conference, was not overly concerned about the recent announcement by the U.S. Environmental Protection Agency that it will cap 2014 corn-based ethanol at 13 billion gallons. He expects corn-based ethanol to take about the same amount of corn in 2014 that it did in 2013. He said we are close to the blend wall on ethanol.
With reduced soybean yields this year due to a wet spring and high demand, he expects soybean acreage to remain high. However, an overabundance of overseas wheat puts more pressure on that commodity and acreage. A huge overhang in cotton supplies in China keeps cotton prices and acreage from rising much.
Doug Hoadley, CF Industries Holdings Inc. director, agri-business analysis, gave the nitrogen outlook, and was a little more conservative on corn, with CF seeing 92 million planted acres in 2014, and 56.5 million for wheat. CF expects total crop plantings to be unchanged to slightly higher. Hoadley said nitrogen application rates should remain stable to slightly higher, with a modest increase in industrial use. Hoadley noted that diesel exhaust fluid (DEF) demand for urea in the U.S. should increase to 1.3 million st by 2018, up from 350,000 st in 2013.
Hoadley outlined the long list of nitrogen plants on tap for North America, and said that by 2017-2018 significant imports will still be needed, with many of the plants on his long list still doubtful.
John Harpole, Mercator Energy president, detailed what appears to be an almost endless supply of shale gas reserves in North America going forward, and predicted that the natural gas price will not get above $5.50/mmBtu on a sustained basis for the next ten years. He attributed the success of the U.S. to its underground reserves being privately owned, saying this factor, coupled with the free market system, has allowed quick development. By contrast, he said shale development around the world has been extremely slow.
Harpole said the shale gas revolution was too successful, and that end-users will benefit. During the next three years he believes supply will likely exceed demand, and that there is no significant demand response for at least 3-5 years. Prices will remain in the $3.50-$4.75/mmBtu range, with prices above and below that range during short periods of adjustment.
Dr. Mike Rahm, The Mosaic Co. vice president, market and strategic analysis, termed the current phosphate market situation as a “slow burn,” with weaker fundamentals and a cautious sentiment. However, he said the market should hit bottom and start recovery in 2014, with a long-term positive outlook. While Indian import demand has collapsed, he expects their imports could go up in 2014-15 to 5.7 million mt from this year’s 3.9 million mt as inventories have been depleted. Other positives in