Sep. 4, 2019
In the recent Q2 reporting season, the big three North American listed fertilizer companies, Nutrien, CF Industries and Mosaic, outlined optimism around North American fertilizer demand for 2020.
The optimism is underpinned by a positive outlook on corn prices and prospective planting increases for 2020. This Insight highlights some of the key market drivers to be aware of over the coming months to assess if this optimism will be realised.
Financial results from Q2 were mixed, with Nutrien and CF both outperforming expectations, while Mosaic was still licking the wounds suffered from the recent unprecedentedly wet spring season. Saturated soils, persistent rainfall and flooding rivers interrupted the movement and application of fertilizers throughout the country.
Because of the lower crop output anticipated for 2019, corn futures spiked in June. Corn crop conditions have improved somewhat in recent weeks, dragging futures lower. However, we expect some upside in futures prices once the USDA corrects its much-criticised area and yield expectations in its upcoming August report.
Fertilizer prices in the US have been a mixed bag. Midwest potash prices have been extraordinarily resilient, while urea prices have been volatile. Inland urea prices surged in May and June as distributors scrambled for product, with flooding along the Mississippi River restricting normal logistical routes. Producers, traders and distributors were innovative in how product was delivered, and the success of this was highlight in the CF Industries Q2 presentation and subsequent earnings call.
Phosphate prices have plunged since October 2018, with difficult logistical and application conditions coinciding with a large volume of imports entering the country. As a result, inventories have built to very high levels. Producers and traders have been looking to liquidate product which has resulted in the lowest prices since 2016.
2020 corn plantings pegged at 95 million acres
The prospects for increased corn plantings in 2020 was a hot topic in the Q2 company presentations and earning calls. Mosaic said, 'we are hearing corn plantings of maybe 95M acres plus in 2020', Nutrien said 'it's easy to see 95M plus acres setting up for 2020', while CF noted '2020 corn acres are bullish...95M acres as a low end'. CRU also anticipates US corn plantings to reach the equivalent of 95M acres in 2020, and this will be supportive for fertilizer demand.