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.