Potash Capacity Expansions to Meet Demand
With rising potash demand expected to challenge the industry’s capability in the coming years, the world’s largest potash producer is expanding capacity.
Saskatchewan-based PotashCorp is developing more than 50% of the world’s incremental capacity by 2015, positioning the company to capture a significant share of future fertilizer demand growth. Capital expansions between 2005 and 2015 are expected to significantly increase operational capability to 17.1 million tons.
Signs of steady supply are showing at the retail level, says Barry Ward, an ag economist with Ohio State University. The retail price of potash in December in Ohio was $500 per ton to $550 per ton (down 10% to 15% from a year ago).
"Potash prices will likely remain steady to higher into 2011, as high crop prices will translate into continued strong demand while the two major potash consortiums will meter out supply to keep prices stable," Ward says.
South Korea Problem Shorts Livestock
South Korea has ordered the culling of more than 1 million livestock production animals since late November to stem its severest foot-and-mouth disease (FMD) outbreak in history, the government said.
"From what I hear they have now found over 110 cases of the disease in infected livestock. The word is most of the animals killed were pigs and cattle," says Kevin VanTrump, an ag commodities market analyst with more than 20 years experience in the grain and livestock industry. "Traders in the industry are now becoming more concerned than ever before that export demand from South Korea and eventually China will soon spike much higher."
The big kicker is South Korea has also suspended imports of German pork because of the whole dioxin contamination crisis, VanTrump says. This will most likely make U.S. pork more attractive to other countries worldwide.
"Don’t be surprised if traders continue to add premium to these markets, at least until they know more about the severity of this problem, how far it will spread and how much livestock will have to be killed to keep it from spreading," VanTrump adds.
Market with a Disciplined Approach
If you want excitement, go to Las Vegas. If you want to make money on your crop production, have a plan and stick to it, says Scott Stewart of Stewart Peterson.
"It basically means, look forward and consider where the market might go," Stewart says. "Lay out strategies for the odds and layer those strategies. Learn how to manage a marketing position on the entire crop to average a high average price and high average return."
Stewart’s marketing approach takes into account planning for up and down moves and also how fast the market is moving in either direction.
"You need to look two or three layers out and look at the different positions you’d use," he says. "If the market is going up very rapidly, you might use an options strategy. If it’s moving very slowly, you may use a futures or a cash sale."
Records for Rice
The U.S. rice market benefited this winter from an increase in exports.
"The real question is, can we continue this pace?" asks Kurt Guidry, Louisiana State University economist. High prices this winter of $14 per cwt. could increase even more with a spillover from rising prices in other commodity markets, Guidry believes.
January’s upward revision in the U.S. rice crop could put a damper on prices, too. The 2010/11 U.S. rice crop is estimated at 243.1 million cwt., up 0.6% from the previous forecast and almost 11% larger than a year earlier. The crop is the largest on record.
Long-grain accounts for all of the increase in the U.S. production estimate. The bumper crop is the result of a 25% jump in harvested area to a record 2.83 million acres.
U.S. ending stocks in 2010/11 are projected at 51.8 million cwt., up 2 million cwt. from December’s forecast and 41% above a year earlier. These are the largest ending stocks since 1985/86. The stocks-to-use ratio is calculated at 21.1%, up 1% from December’s estimate and well above the 15.8% in 2009/10.
Off-Farm Storage Grows in Midwest
Capacity of off-farm commercial grain storage in the U.S. totaled 9.74 billion bushels on Dec. 1, 2010, up 3% from Dec. 1, 2009. The largest increase occurred in Iowa, where an additional 50 million bushels of capacity were added since Dec. 1, 2009.
Other notable increases were shown in Illinois, where capacity increased 40 million bushels, and Nebraska, where capacity increased 26.9 million bushels from a year ago.
Iowa, Illinois, Kansas, Nebraska and Texas account for 52% of the nation’s off-farm storage capacity as of Dec. 1, 2010.
Off-farm grain storage capacity includes all elevators, warehouses, terminals, merchant mills, other storage and oilseed crushers that store whole grains, soybeans, canola, flaxseed, mustard seed, safflower, sunflower, rapeseed, peas, lentils and garbanzo beans.
A Dog Fight for Acres
Despite the second largest crop on record, U.S. soybean supply is tight due to strong world demand, particularly from China.
The U.S. carryout for soybeans is now 140 million bushels, down from 165 million bushels in December. The market is "extremely tight," says Peter Georgantones, from Abbott Futures, Minneapolis.
Worldwide, soybean supplies are not as pressured. Brazil has a huge crop, Georgantones notes, and USDA pegs Argentina’s soybean crop at 3 million metric tons smaller than 2009/10.
Still, Georgantones expects this spring to be "a real dog fi ght" as corn, cotton and soybeans all vie for acreage.
"The math doesn’t add up as to how we are going to get all the acres we need," he says. Some smaller crops, such as barley, might have to give up acres to corn and soybeans.
- February 2011