Excerpt from prepared text of Steve Wilson, CF Industries president and CEO, presented at Agricultural Retailers Association annual meeting and expo in Dec., 2010.
In such a global industry, circumstances in one region of the world affect the rest of the industry as a whole. Each of the events noted has had an impact, large or small, on every part of the industry around the globe.
Production outages, shifting levels of fertilizer demand and the country-specific regulations to which each producer must conform all contribute to global industry dynamics. All of these factors combined to reduce available fertilizer supply in the world over the last four months.
At the same time, fertilizer demand has been very strong. The combination of high demand and tight global supply has had a predictable impact on prices. Demand for each of the three major nutrients is projected to be up significantly this fertilizer year, with nitrogen and phosphate application returning to 2007 levels.
Needless to say, we look forward to working closely with you to make sure that your growers get the product they need, when they need it, and in the volumes they demand to maximize their crop yields.
Both producers and retailers need to manage the effects of a number of factors that are beyond our control. Commodity prices are subject to global supply and demand dynamics, which in turn determine import/export prices and availability. Weather is always a wild card, with particularly significant regional impact. Transportation costs vary with fuel prices and, for example, with railroads’ willingness to handle hazardous materials.
Global financial markets can materially affect our industry, through changes in exchange rates, availability of credit and levels of worldwide investment. CF Industries is committed to helping our customers manage these risks through programs like our Forward Pricing Program.
Finally, perhaps the largest factor outside our control is government regulation.
(Read another excerpt from Wilson's speech about government regulation in next week's Dealer Update.)