NPK Weekly
Fertilizer Market Weakens as Buyers in “Wait and See” Mode
4 December 2011 ¦ 12 pages
citigroupgeo.com
Insights from Citi’s Ag Conference – Overall, we believe that fertilizer buyers are in
“wait and see” mode, as the typical seasonal slowdown in demand in North America is
being exacerbated by macroeconomic challenges. Most companies at our conference
expect that high grain prices will incentivize US farmers to plant 93-95mm acres of corn
in 2012, an increase from nearly 92mm acres this year. However, an Ag consultant that
presented believes it will be more difficult to increase corn acres next year, as land on
the periphery of the cornbelt where corn was planted this year may revert back to other
crops. In addition, this consultant believes the drought in the western US resulted in a
~20% reduction in cattle herd sizes, which could impact meat prices in 2012. Finally,
there was discussion of the origins of the high basis for US corn (difference between
corn prices for spot use in the Midwest and the price on the futures market), with some
conference participants suggesting that ethanol production has been pulled forward to
take advantage of the blenders tax credit before it expires at the end of the month. For
additional insights from the conference, please see Up-cycle Hits a Lull, But Longer-
term Fundamentals Strong. Benchmark prices in North America were flat to down this
week, as US Gulf urea prices fell 6% to $433/st while Central Florida DAP dropped
modestly to $575/st, and Saskatchewan potash prices were unchanged at $533/st. |
