US corn sowings are poised for their most dramatic fall in nearly a decade in 2017, CF Industries said, even as the nitrogen fertilizer group unveiled its first loss since 2010, sending its shares tumbling.
The US-based nitrogen fertilizer producer said that while the overall outlook for North America "suggests continued profitability at the farm level for corn and soybeans", there was some regional variation.
CF flagged "less profitable acreage in the Western Corn Belt and South East" of the US.
"Accordingly, planted acres for corn are expected to decline to approximately 88m acres" next year, from the US sowings of 94.5m acres this year, on US Department of Agriculture data.
Bert Frost, the group's senior vice-president of sales, also told investors the group was expected US "wheat acres to remain flat at 50m acres" for the 2017 harvest.
Corn plantings at the level suggested by CF would match those in 2015, which set a six-year low. In terms of the pace of decline, a drop of the magnitude suggested has not been seen since 2008, when corn sowings tumbled by some 7.5m acres.
The drop is also greater than that suggested by Informa Economics, which two weeks ago estimated US corn plantings next year at 90.97m acres, with the analysis group forecasting that soybean sowings will rise to a record 88.49m acres, from the 83.7m acres seeded this year.
Futures prices are currently incentivising growers to switch some area from corn to soybeans, with the much-watched ratio between new crop November 2017 soybean futures and December 2017 corn futures in Chicago standing on Thursday at 2.55.
That is into territory seen as giving soybeans the advantage in terms of return prospects to growers, with a ratio of 2.0 or below seen as more favourable to corn.
'Now projects a loss'
The drop in corn sowings would appear a negative signal for fertilizer groups, given that the grain is a particularly nutrient hungry crop, with soybeans, for instance, fixing nitrogen from the air.
And CF Industries made its comments as it unveiled a loss of $30m for the July-to-September quarter, compared with earnings of $90m a year before.
While a slide into the red - the first since 2010 - had been expected by investors, the extent of the decline, equivalent to $0.13 per share, was biggest than the $0.03-per-share loss Wall Street had forecast.
And it came despite a tax benefit of $131m being recorded this time, compared with payments of $20m a year before, reflecting the group's worsened financial performance/
"The tax benefit recognized in the third quarter is primarily a result of the fact that the company now projects a 2016 pre-tax loss… compared to a projected positive pre-tax income… [expected] at the end of the second quarter of 2016."
The group highlighted a drop in sales prices which cut revenues in the latest quarter by 27% to $680m, with its average selling price falling by 36% year on year.
"Selling prices were negatively impacted by the continuing global oversupply of nitrogen fertilizer and overall lower industrial demand," CF Industries said.
"An oversupplied international market was lengthened further by new plant start-ups and seasonal decreases in North American demand, partially offset by increased demand in South America."
The group revealed sales price declines of 35-36% across most of its nitrogen portfolio, including ammonia and urea, but with a smaller decline, of 25%, in ammonium nitrate.
And it flagged a "slow" start to the newly begun 2017 fertilizer year too, with "delays in buying activity", as price declines tempted consumers to delay orders.
"The expectation of additional supply resulting from major North American expansion projects scheduled to come on line through mid-2017, as well as the focus on the large crop harvest in progress, contributed to the purchasing delays."
CF Industries shares tumbled 8.5% to close at $22.60 in New York.
By Mike Verdin