US corn sowings may fall again next year, but will remain
above long-term average levels, CF Industries said as it forecast strong demand
for nitrogen fertilizers, in the face of growing imports from China.
US growers will in 2015 plant "over 90m acres" of corn, CF
said in its first forecast for plantings next year of a crop which, being
nutrient-intensive, has a particular impact on prospects for fertilizer
The estimate, which compares with the 91.6m acres planted
this year, leaves scope for a third successive fall in sowings of the grain,
whose popularity with farmers has come into question thanks to a fall in prices
to their lowest since 2010.
Already, estimates are retreating for South American
sowings, starting next month, ahead of harvest early in 2015.
CF's figure also allows for some fall below the 91.0m acres
that the US Department of Agriculture has pencilled in for US corn sowings next
season, for which it has forecast values falling further, to an average of
$3.30 a bushel, in terms of what farmers receive.
Nonetheless, a figure above 90m acres would exceed levels
which averaged 82.8m acres from 2001-10, before soaring prices encouraged
sowings to jump to 97.16m acres in 2012, the highest since World War II.
"We expect robust nitrogen demand during the second half of
2014," Tony Will, the CF Industries chief executive, said.
"With the necessity of annual nitrogen application, and
historically low fertilizer costs relative to crop revenue, farmers continue to
have strong incentives to apply appropriate levels of nitrogen."
The comments follow an April-to-June quarter which proved
mixed for CF's sales volumes, with ammonia uptake soaring 33% to 1.11m tonnes,
but in part at the expense of more expensive UAN (urea ammonium nitrate) for
which volumes dropped 6% to 1.53m tonnes.
Sales volumes of urea itself fell 4% to 677,000 tonnes,
reflecting smaller inventories coming into the quarter, which also allowed
North American prices of the nutrient to trade at a premium of $10-30 per tonne
to international values.
Nonetheless, group revenues dropped 14% to $1.47bn, down to
lower prices, with all fertilizer markets feeling some effect from the break-up
of the Belarusian Potash Company cartel last year, although a build-up of
inventories of ammonia in North America hit values of that nutrient in
CF sold ammonia at an average of $544 a tonne during the
quarter, a 23% decline year on year, while values of urea were, ats $396 a
tonne, up 3%.
Earnings fell 37% to $312.6m, equivalent to $6.10 per share,
short of the $6.71-a-share result that analysts had expected.
Urea price fall ahead
CF forecast an end ahead to the urea price premium, as
exports from China ramp-up, expected to rise 2m tonnes to 10m tonnes this year
to the world market.
"Imports are expected to increase in the second half of the
year and prices in North America are anticipated to decline toward parity with
international delivered prices," Illinois-based CF said.
However, it forecast a "positive" outlook for the group,
supported by the long-term need to improve crop production to meet world
demand, and unveiled a $1bn share repurchase programme and a 50% hike to $1.50
a share in its quarterly dividend.
"Our belief in the sustainability of our cash flows and our
dedication to growing shareholder value is evidenced by our capital deployment
actions," Mr. Will said.