2013 in Review
Jan 03, 2014
From the end-user's perspective it turned out to be a great year for fertilizer. Ammonia was priced high through the spring but as heavy rains took their toll on the Midwest, the way forward to nutrient reduction was forged on the back of split UAN applications. In-season sidedress was as popular as ever and now USDA, EPA and state Departments of Agriculture look ahead to combating nutrient runoff with more efficient N applications with the agile, versatile and mobile UAN. I have included our featured headlines in green. Click the headline to link to the story.
Corn Emerges in Central Iowa, What the Color of Corn Can Tell You
Corn prices fell off and new-crop returns are expected to remain depressed by ample supplies and stronger than expected 2013 crop yields. This has industry watchers projecting a falloff in corn acres in the coming year, but the reductions would not do much to decrease N demand, removing less than 1 million tons of projected demand. However, the U.S. will remain reliant in imports for at least another calendar year and as mentioned above, UAN is expected to do a lot of heavy lifting as uncertainty in corn futures favors split applications.
Capture Savings on Inputs While Corn Futures Doze
The tragic explosion in West, Texas continues to weigh on the minds of regulators and legislators. California Democrat Barbara Boxer carried the torch to a number of committees and President Obama forwarded an executive order to tighten fertilizer regulations. This is, however, a necessary shift in perspective. After 911 and the Oklahoma City Bombings, purveyors of Ammonium Nitrate adopted a mindset of security. Methamphetamine makers targeted anhydrous tanks across the heartland, punctuating the need to increase security at fertilizer depots.
Explosion at Texas Fertilizer Facility Claims Lives, Several Injured, West Texas Trojans Host Season Opener
After the explosion in West, and subsequent other accidents, the focus of regulators shifted from security to safety. In the coming year, retailers will be subject to greater scrutiny on the part of regulators and would do well to tighten-up in anticipation of upcoming inspections. Much of the reporting about fertilizer that followed the April Texas blast got it wrong. On more than one occasion, fertilizer was blamed for grain dust explosions and wood chip fires, making it easy for regulators to believe that fertilizer is more dangerous than it is.
Geismar, LA Olefin Plant Explosion, News Reports Fault Fertilizer for Grain Dust Explosion, Cedar Chips Smolder Disconcertingly -- Fertilizer Looks On
Senator Boxer, EPA to Probe Texas Explosion at June 27 Hearing, Obama Orders Tighter Fertilizer Regulations
The July breakup of the Belorussian Potash Company rippled around the globe and stock in potash producers tumbled as Uralkali threatened to oversupply the market in an effort to secure marketshare. I maintain that the timing is more than a little suspicious. At the same time Uralkali shocked the market with its resignation from the joint venture, U.S. corn prices took a dive, suggesting U.S. fertilizer prices would be where they are today either way.
Potash Shakeup: Teasing the Bull Behind the Fence
The CEO of Uralkali was jailed in Belarus facing up to ten years in a Belorussian gulag. But a stock sale from vilified Uralkali investor Suliemon Kerimov inspired Belarus to move CEO Baumgertner to house arrest, and to later extradite the then dethroned CEO back to Russia where he remains under house arrest today.
Uralkali CEO Detained in Belarus for Abuse of Power, Minsk Looks to Recoup $100 Million from Uralkali
PotashCorp CEO Bill Doyle very publicly chided the BPC breakup as the "Dumbest thing he had ever seen," and it now appears the joint venture will patch things up and resume communal operations. Meanwhile, PotashCorp was forced to make cuts in both production and workforce that amounted to 18% reductions for each.
BPC to Service K Demand -- India Tags Discount, The True Future of Global Potash Pricing
Energy was a wild ride as well and this year saw WTI pricing overtake the Brent price for a short time and as crude constraints in Libya, Iraq and other OPEC nations mounted. U.S. Crude producers were more than happy to ship LLS crude to global markets, bypassing stops at Cushing, OK, tendering crude on the global market via NOLA. WTI prices ran well above $100.00/barrel during the summer, but in a tasty irony, gasoline consumption in the U.S. has fallen, ethanol production is booming, and gasoline prices fell despite the increases in domestic crude oil pricing.
Petroleum Report: WTI Forges A New Kind of Parity, Keystone XL Pipeline May Raise Midwest Gasoline Prices
Natural gas has been divorced from nutrient pricing as not enough nitrogen is produced here in the United States to impact pricing. But several nitrogen producers are positioning themselves to open greenfield facilities along with expansions to existing capacity. However, even with increased production capacity based on inexpensive shale gas, the U.S. will still rely on imports for an unknown portion of demand.
Between The Shale & A Hard Place, EPA: Fracking is Cleaner Than Once Thought, Poll Results: Most Americans Oppose Natural Gas Exports
Winter came on quick and the mercury headed south in a big hurry. Natural gas responded by running higher, and as demand spiked, drawdowns in national storage exceeded expectations with regularity, holding natgas futures at the top end of their annual range, where they remain today. We look for natgas to reverse later this spring when temperatures ease, but today, the parts of the nation that are not choked by fresh snow are in the deep freeze with northern regions eyeing record low temperatures. That will keep natgas demand -- and prices -- high near-term.
More Energy links...
U.K. Shale Boom A Drop in the E.U. Bucket
Adjusted Blend Lowers Quality of Ethanol, Big Oil Pockets the Change
California Oil Explores Hydrofluoric Acid Solution
On the farm it was a difficult spring for most. Just about the time the crop was in, the rains we needed last year showed up in spades and ponded out swaths of corn. That washed nitrogen out and led many to lean on split UAN applications.
Rain-Soaked Fields Revisited, When the Application Window Shrinks, Planning is the Best Fertilizer
Some believe fertilizer manufacturers were due for comeuppins this year and blame artificially high priced product from Canpotex for elevating fertilizer prices above market value in 2008. The three Canpotex players were forced to pay settlements in Illinois to settle the allegations out of court.
Canadian Ag Titans Settle Out of Court
On farm propane delivery hung some growers out to dry. The late planted crop came in wet and needed to run thorough the dryer before it could be stored and marketed. That late season demand spike inflated LP pricing above $1.80 in Midwest averages. A Minnesota propane pipeline will be diverted away from LP transit to service shale operations, forcing LP deliveries and shipments to move by rail and truck, adding expense. We expect LP pricing above last year's pricing, but have noted an annual dip in July. We will look to pick up some propane then. Officials from the Minnesota Propane Gas Industry suggest increasing LP storage on your farm in the coming months.
NPK Outlook: Forget Fertilizer -- Book Some Fuel, Bank P&K From Manure, Consider N a Bonus, On-Farm Fertilizer Storage Considerations
The biggest issue for fertilizer this year has by far been nutrient reduction. I have spoken personally with Iowa Secretary of Agriculture Bill Northey on the topic several times and as agricultural states look to reduce the flow of N&P into the watershed, management practices on the farm will need to include more efficient nitrogen applications. USDA Economic Research Service believes growers can maximize yield while minimizing N loss with the implementation of split applications -- there's that UAN again.
Northey believes that the Environmental Protection Agency will not impose blanket regulations aimed at nutrient reduction as long as farmers participate in the effort voluntarily. Some would like to see conservation compliance tied to crop insurance, and that may turn out to be the hook EPA is looking for. But compliance often comes with enforcement, and the federal government really cannot afford to fund an enforcement entity that would have to check under every tarp on every farm for poorly placed manure piles or other infractions.
I do know one thing those in power want -- they want your data. They want to know your rates, how and when you applied fertilizer... they want to know how much N&P was removed by the previous crop, and where and when you spread manure. Retailers, they want to know how much fertilizer you have on hand, how much you have delivered, applied, where, when, how, all of the above and more. My advice on conservation compliance and nutrient reduction is to get your mind around the fact that EPA and USDA want to know the details of your operation.
To be honest, the idea gives me the creeps and I know I am not alone in that. But regulations will come if voluntary efforts at nutrient reduction are not observed and put in to practice. If you are already making efforts let me encourage you to start documenting those -- perhaps start a 'conservation file' in case regulators one day come knocking, asking, "what have you done so far."
Nutrient Reduction -- Grassroots Effort to Hold Regulation at Bay, Voluntary Efforts to Reduce Runoff Win Praise From Vilsack
Perspective: The perspective from January 1, 2014 includes uncertainty. Low corn prices are expected to stick around at least through the upcoming crop-year and some put the potential for a corn recovery in 2016. To the good, low corn prices will keep fertilizer prices low.
We expect fertilizer prices to stay where they are until demand picks up in the spring. March is in our bullseye right now and when the opportunity looks right, we will advise to cover spring nutrient. Watch out for UAN prices as spring and summer demand is likely to be high. I like anhydrous around $650 for spring, phosphate at $500 and potash pretty close to where it is now at $475/short ton.
Explosions, nutrient runoff, global intrigue -- fertilizer 2013 had it all. Expect fetilizer prices to mirror corn futures, and for nutrient demand to be strong this spring. Consider adding to your LP storage capacity and prepare for the day when your farm data may be worth its weight in gold. Thank you for reading this year and for making your Inputs Monitor part of your decision making process. We have big plans for the coming year, so stay tuned and, as always, safety first.