CF unveils hopes for 'Goldilocks' corn market

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 group said.

'Imports have been limited'

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 shipments".

'Brisk fall application'

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 said.

"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.

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