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Yara, PotashCorp throw brickbats at each other's fertilizer sectors

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Low world crop prices are more of a threat to potash and phosphate use than demand for nitrogen fertilizers.

But it is nitrogen-based nutrients which are most vulnerable to China's moves to switch domestic farmers from corn to other crops.

At least, that is what can be deduced from statements this week from Yara International, the world top nitrogen group, and leading potash producer PotashCorp, which both signalled relatively upbeat prospects for their respective nutrients.

'Still supportive for nitrogen'

Yara International on Thursday - unveiling promising signs on nitrogen use which trumped, for share investors, a bigger-than-expected drop in earnings – downplayed the threat to fertilizer demand from the dent to farmer spending from weaker crop prices.

"Although US denominated crop prices are lower than a year ago, they are still supportive for fertilizer use, nitrogen fertilizer in particular," Yara said.

"For phosphate and potassium [potash] fertilizers, where many farmers can reduce application for a while without significant negative yield effects, global demand is more affected by the reduced crop prices."

'Some impact on nitrogen'

The comments contrast with a less sanguine outlook for nitrogen than potash in China – at least, according to Canada's PotashCorp, which flagged the knock-on effects of reforms to a generous subsidy programme for growing corn.

The scheme, in offering farmers elevated and guaranteed corn prices, "raised domestic corn prices 30-50% above world levels and encouraged farmers to increase corn acreage by 44% over the past decade", PotashCorp said.

However, corn sowings could, by 2020, "be reduced in 13 provinces by about 8.2m acres", equivalent to a drop of about 9%, thanks to government plans, backed by spending of 3.5bn yuan, to encouraged farmers to switch to the likes of potatoes and soybeans.

"From a fertilizer market standpoint, there could be some impact on Chinese nitrogen consumption if corn acreage is reduced in favour of crops such as soybeans," PotashCorp said.

"We believe the impact on potash would be less given current low potash application rates on poor quality corn land, and a more neutral application rate trade-off between corn and substitute crops such as soybeans."

The comments came as PotashCorp forecast, for China, a "more supportive price environment in the second half of 2016", as previously reported by Agrimoney.com.

By Mike Verdin

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