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US corn sowings set for strong recovery in 2020, say fertilizer groups

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Fertilizer groups retained ideas of higher US corn sowings next year, although by a slightly lower uplift than previously signalled, while seeing the palm oil price revival too as supportive for nutrient demand.

 

Spring 2020 will – assuming a return to more normal weather - see a marked rise in corn plantings from the 89.9m acres estimated by the US Department of Agriculture, depressed by wet spring weather from reaching the 92.8m acres that farmers had originally expected.

 

Indeed, with higher prices too, fertilizer companies believe that corn area could rise by at least 3m acres, and potentially hit 95m acres for only the third time since World War II.

 

“Today, US farmers are looking at corn prices closer to $4 a bushel… which is higher than at this point last year,” Chuck Magro, chief executive of potash-to-farm retail group Nutrien said, noting a “10% increase in prices from summertime lows.

 

“We expect total US acreage to increase by at least 12m acres in 2020, including 93m-95m acres of corn.”

 

‘Prices will continue to rise’

For nitrogen group CF Industries, Bert Frost, head of sales and market development, said that the US was poised in 2020 for “93m-94m, maybe even 95m acres of corn”, a prospect he termed “very positive” with corn a more nutrient-hungry crop than the likes of soybeans or wheat.

 

Potash and phosphates producer Mosaic forecast corn US sowings at 93m acres next year, supported by prices it saw possessing potential for further gains.

 

“As more acres are harvested, we’re seeing yields come in lower,” James O’Rourke, the Mosaic chief executive told investors.

 

“There are a lot of acres yet to harvest, but our expectation is that yields will continue to slip lower and commodity prices will continue to rise.”

 

Key ratio

However, some of these forecasts are below those espoused in the summer, when corn prices stood above $4.00 a bushel, if below the June high of $4.64 ¼ a bushel, on a spot contract basis, reached when US area worries were at their peak.

 

CF Industries in early August said that 95m acres was the “low end” of the corn sowings forecast range, while Nutrien talked of a figure of “around 95m acres”.

 

Corteva Agriscience - the former Dow-DuPont ag business, which owns seeds giant Pioneer - last week highlighted that price signals were in fact suggesting that soybeans would pick up around two-thirds of the combined 11m acres lost to the oilseed and corn this year.

 

The ratio between November 2020 soybean futures and December 2020 corn ones, watched as an indicator of the relative price appeal of the crops to growers for next year’s harvest, stood at 2.41 on Wednesday, up from 2.27 at the start of August.

 

Corn vs soybeans

The fertilizer groups flagged the prospect of increased corn sowings as a major boost to

 

“We believe our customers are expecting a positive fall ammonia season, given expected strong corn acres and attractive nutrient pricing,” said CF’s Bert Frost.

 

“The combination of nutrient-depleted soils, more planted acres and excellent affordability of crop nutrients bodes well for fertilizer demand into 2020,” said Mosaic’s James O’Rourke.

 

Nutrien’s Chuck Magro said that, thanks to increased crop sowings, it expected expect “US crop input expenditures to increase by around 7% next year”.

 

The group, highlighting corn’s greater needs for inputs thank soybeans, said that in earnings before interest, tax, depreciation and amortisation (ebitda) terms, “1m acres of corn is worth approximately $6m to us and 1m acres of soybeans is about $3m”.

 

‘Demand tailwind’

The recovery in palm oil prices - the top performer among major agricultural commodity contracts last month, with a 16% gain in Kuala Lumpur, where prices have added a further 2.8% so far in November – also boded well for potash demand ahead.

 

“We’ve seen a good recovery in Malaysia, Indonesia with palm prices and expect to see good potash demand there,” said Corrine Ricard, the Mosaic commercial head.

 

Mr Magro said that “palm oil prices have improved by more than 30% from June 2019 lows, supported by a tightening supply-demand outlook and higher global soybean prices.

 

“We see this as a tailwind for South East Asian potash demand in 2020.

 

“There is an increasing demand for biofuels in Asia,” with palm oil used largely in making biodiesel, “and so all of that bodes well for our rebound next year in South East Asia”, the top palm oil-producing region.

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