Fertilizer demand may not be weakened by drought

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Market analysts are predicting that fertilizer consumption will not decline as a result of the current drought conditions in the nation’s Corn Belt. Citi Investment Research indicated that fertilizer producers would be in a good position this year.

“We think investors are over-estimating the potential for demand destruction in North America due to the ongoing Midwest drought,” analyst P.J. Juvekar wrote in a note.

Severe heat and lack of significant rain is reducing the corn and soybean crops nationwide. The current drought is considered to be on par with the drought of 1956, according to the National Oceanic and Atmospheric Administration.

Last week, Mosaic issued a statement saying it did not expect the drought to dent fertilizer sales. Alternatively, the drought is likely to increase fertilizer demand, according to the company.

Jukevar explained that Citi’s research showed that fertilizer demand, on average, increased after droughts in 1983 and 1988.

“While it is possible that per acre application may fall, overall planted acres could increase in the U.S. and are very likely to increase in Latin America, providing a possibly bigger offset,” the analyst wrote to Reuters.


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Ralph    
Lucerne, CO  |  July, 26, 2012 at 03:20 PM

We had a drought 10 years ago this severe and every acre we applied fertilizer to that didn't grow a crop didn't receive one pound of fertilizer the next year. The manufactures are dreaming if they think farmers are going to fertilize fields that burned up.

Canadian FarmBoy    
CalgaryAlberta  |  July, 26, 2012 at 06:54 PM

A drought will also release a lot of organic matter, freeing up some more soil N, plus this years applications should mostly stay intact, there wont be any leaching. The N rates will definitely be much lower next year, less than half in the severe drought areas. I'm not sure how much subsidization and income protection goes on, but without that, cashflow would really be cramped, which would also reduce N rates dramatically. Alternatively, areas outside of the drought affected area are having some ideal high yields and record high prices, the whole globe will respond to these higher prices with increased N rates. In Western Canada, this year will set records for highest revenues ever, and next years N rates are likely to set records for highest ever too. It's hard to know for sure, but I just bought more stock in CF and Terra, a great buy right now.

Allen    
Otwell, IN  |  July, 27, 2012 at 07:42 AM

In ag retail for 38 years. Area under severe drought. 0 to 100 bu corn yeilds expected. Several acres @ 0 yeild and already destroyed. Here in the real world phosphate and potash usage will be at half of 2012 in 2013 if that!

fertile fred    
utica ky  |  July, 27, 2012 at 08:53 AM

Been in this for 40 years. Fertilizer use declined30 % in 2008,due to price. Fertilizer not used by drought crops will carry over for next year.The fert producers better hope there are some good yields somewhere or 40 % is a very real number


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