CF Industries forecast a Goldilocks scenario for the US corn
market – with values good enough to support farmers' returns but without pricing
users out – as it unveiled "confidence" in prospects for fertilizer demand.
The US-based nitrogen and phosphates group, which also owns the
Keytrade fertilizer trading business in Switzerland and half of the UK's
GrowHow group, said that tight supplies of corn, soybeans and wheat "underpin
out expectations of high crop prices".
Elevated prices "are supporting expectations that growers in
North America, Europe, Ukraine and China will plant very large areas to grain",
a factor "which should create robust global demand for plant nutrients,
especially nitrogen, during the first half of 2013".
Stephen Wilson, CF's chairman and chief executive, said: "Agricultural
market conditions are as attractive today as at any time in recent history, and
give us confidence in the demand outlook for our products."
Good for farmers, but not too good
However, crop prices would not be high enough to deter users, nor
encourage production sufficient to slash farm profits, CF said - focusing on
corn, and portraying a market not too overheated, nor too cool, but just right, as
with the porridge in the children's story of Goldilocks.
"CF Industries projects that US farmers will plant 97m acres
of corn in 2013 with a forecasted yield of 160 bushels per acre, compared to
actual 2012 of 97m acres and a yield of 123 bushels per acre," CF said,
restating an area forecast made in November.
"These factors should lead to corn prices that sustain
demand while still allowing farmers to earn attractive returns."
These dynamics would even foster a revival in the phosphate
market which, while currently "weak" will "improve" over the first half of
2013, boosted by the onset of northern hemisphere spring planting seasons.
"Demand should materialise later in the first quarter," the
'Imports have been
Meanwhile, within the nitrogen complex, demand for US urea
would be spurred by lower competition from imports, which sent both CF's prices
and sales volumes of the nutrient lower in the last three months of 2012.
Last week, Yara International, the world's biggest nitrogen
group flagged the unusually large urea shipments from China late in 2012, given
the entry into what should be a seasonal period of high export taxes.
In recent weeks "North American urea ammonium nitrate
imports have been limited, as high prices and strong demand in Europe and the
Ukraine have resulted in nitrogen products flowing to those markets", CF said.
With delays to some new US urea projects too, "CF Industries
has experienced strong interest from customers for spring urea ammonium nitrate
Meanwhile, the important Midwest market for ammonia "are
expected to be tight-to-balanced" in the first half of 2013, after a strong
finish to 2012.
"Fertilizer markets during the fourth quarter were
characterised by strong North American demand for ammonia and phosphates," CF
"Weather that alleviated some moisture concerns and an early
harvest led to brisk fall application of ammonia on fields across the Midwest
and Plains states."
The strong ammonia performance helped limit to 4%, to $1.6bn
a drop in CF's underlying sales for the fourth quarter, blamed primarily on
lower phosphate prices.
Earnings rose 7.2% to $470.7m, equivalent to $7.40 per
shares, and ahead of the $6.95 a share that Wall Street had expected.