The company's outlook is very positive. Low domestic and global grain stocks are expected to drive high plantings for the next several years. The USDA projects that U.S. farmers will plant more than 90 million acres of corn each year through 2015, which would provide a very supportive demand environment for the company's products.
The short-term outlook also is favorable due to high expected plantings and nutrient application rates. In some areas of the Corn Belt, direct application of ammonia started on time, but subsequently was slowed by wet weather. Delayed planting and wet soil conditions could impact farmers' choice of nitrogen products, reducing the ammonia portion of the mix in favor of UAN and urea compared to the ideal spring ammonia season of 2010.
North American farmers are recognizing the benefits of UAN, which increases application flexibility and facilitates earlier planting. The company expects robust UAN demand in the second quarter, which will benefit CF Industries given its strong market position for this product. The company is taking advantage of its industry-leading flexibility in transportation and logistics to reposition its products for optimal coverage during the late, but still very promising, spring.
High demand, the narrower export window in China, gas limitations at some facilities and delays in certain scheduled capacity additions are expected to keep world ammonia and urea supply and demand balanced to tight. The company expects global ammonia demand and prices to continue to receive support from rising industrial demand and high phosphate production rates. Phosphate prices continue to benefit from high demand and new project delays.
The company's position in the nitrogen market also stands to benefit from relatively stable, attractive natural gas costs in North America and higher energy prices in Europe and Asia. Spot natural gas prices in Europe have risen due to expected higher demand for liquefied natural gas (LNG) in Japan, and oil-based contract prices have reached $13 per MMBtu in some countries that buy gas from Russia without formula discounts. In China, higher energy prices also have raised local production costs for urea.
"Under current industry conditions we believe that CF Industries will enjoy an extended period of strong profitability," said Wilson. "In the short term, we are positioned for a very good spring. Longer term, the combination of tight grain markets, the favorable cost position of North American nitrogen producers, and our unmatched flexibility in product movement make us very optimistic."
The company expects capital expenditures of approximately $300 million in 2011.