I am considering reducing my phosphate rate this year, just wondering how many others are considering the same. Phos is one nutrient that can be cut depending on past use and soil needs. Last year I had a quarter section of extra phos left over cause my drill had a misshap twice so no phos put on one quarter in 2 80 acre parcels, there was absolutely no visible crop deficiency, yield monitor also showed no yield loss. A 25 percent cut by a lot of farmers would send Mosaic a message. As far as Potash Corps announced one month shut down at the Allan Potash mine all that is is a past due maintenance shut down They are trying to say it is to curb supply.
Week old news about phosphate
Analysis: Mosaic may have won skirmish in fertilizer warsBy Euan Rocha and Rod Nickel
TORONTO/WINNIPEG (Reuters) - Mosaic, a leading North American fertilizer producer, may have won the battle to arrest a plunge in phosphate prices ahead the region's spring planting season, but it still risks losing the war as overseas capacity surges in the coming years.
Production cuts announced on Wednesday by Plymouth, Minnesota-based Mosaic (MOS) account for only about 12 percent of its quarterly phosphate production capacity and a small fraction of global capacity.
Even so, the move could help tighten markets before dealers begin to restock inventories ahead of North America's spring planting season.
"What you've got is very, very, very little spring buying," said Dahlman Rose & Co analyst Charles Neivert, adding that dealers are holding off buying phosphate fertilizer in anticipation of lower prices.
"Mosaic's move certainly improves the chances of getting a little bit better pricing and we certainly expect pricing to go up into the spring," he added.
Even as the price of widely used diammonium phosphate, or DAP, adjusts to this season's market dynamics, the long-term trend is undeniably bullish. Growing demand for high-quality food in emerging economies is expected to keep demand for all three major crop nutrients - nitrogen, phosphate and potash - rising over the coming decades.
For that reason, producers are scrambling to add capacity and that could hurt Mosaic and its North American rivals - Potash Corp POT.TO (POT) and CF Industries (CF) - over the medium term, even if phosphate pricing strengthens ahead of spring plantings.
Pricing over the next three years could come under pressure as production from the huge Ma'aden phosphate project in Saudi Arabia ramps up. On top of that, Morocco's state-owned OCP, the world's largest phosphate rock miner, is expanding both its phosphate rock and finished fertilizer production capacity.
In a recent note to clients, Lazard Capital analyst Edlain Rodriguez warned that capacity creep from Ma'aden, along with rising raw material costs, could keep both DAP prices and profit margins in check.
"We see limited upside in near-term prices as Ma'aden ramps up production in 2012 and 2013, with production increasing from 400,000 tons in 2011 to nearly 2 million tons in 2012," he said.
To be sure, analysts believe DAP prices won't collapse under the weight of the extra capacity, as global demand for the fertilizer is still growing at a steady pace.
"Average DAP pricing will probably decline, because you are going to have that much more DAP in the market, but I don't think Ma'aden is going to be massively interfering. I don't think it's going to be a crusher for DAP markets," said Neivert.
CORN PRICES DRIVE DEMAND
For the time being, corn prices, a crucial driver of crop nutrient demand in North America, may aid Mosaic's cause. Prices had dipped below $6 a bushel in recent weeks, but weather-related concerns have pushed prices back above the $6 mark over the last two weeks.
"It's all about the corn price," said Ticonderoga Securities analyst Mark Gulley. "The corn price drives both equity prices and fertilizer selling prices."
Dealers have also stayed on the sidelines because they are wary of placing orders at higher prices, as many of them had to book huge writedowns on inventories the last time DAP prices collapsed during the economic meltdown in 2008, said David Dow, owner of Dow Fertilizers, a dealer near Edmonton, Alberta.
"My first knee-jerk reaction is they're just doing this to keep prices up," said Dow. "I'd be surprised if the price didn't go up."
U.S. DOLLAR IMPACT
Mosaic's move, while modest, should be all that's needed to support prices, analysts say. As a result, Potash Corp and CF Industries are unlikely to make similar cuts.
"I don't think you'll see much," said Neivert. "You'll probably see modest curtailments by others, but they won't say anything about it because they won't be material enough to make an announcement about."
A strong dollar may prove a more significant hurdle for U.S. and Canadian fertilizer producers, says independent analyst Chris Damas. Their products would become less competitive in overseas markets if an escalation of the euro zone's sovereign debt crisis pushes up the greenback.
"A strong U.S. dollar could hurt North American fertilizer exports over the coming year, as the currencies of key emerging markets like India and Brazil have weakened, making it harder for farmers in those markets to afford high-priced fertilizers," he said.
(Additional reporting by Thomas Polansek and Ernest Scheyder; Editing by Frank McGurty)
Week old news about phosphate
Analysis: Mosaic may have won skirmish in fertilizer warsBy Euan Rocha and Rod Nickel
TORONTO/WINNIPEG (Reuters) - Mosaic, a leading North American fertilizer producer, may have won the battle to arrest a plunge in phosphate prices ahead the region's spring planting season, but it still risks losing the war as overseas capacity surges in the coming years.
Production cuts announced on Wednesday by Plymouth, Minnesota-based Mosaic (MOS) account for only about 12 percent of its quarterly phosphate production capacity and a small fraction of global capacity.
Even so, the move could help tighten markets before dealers begin to restock inventories ahead of North America's spring planting season.
"What you've got is very, very, very little spring buying," said Dahlman Rose & Co analyst Charles Neivert, adding that dealers are holding off buying phosphate fertilizer in anticipation of lower prices.
"Mosaic's move certainly improves the chances of getting a little bit better pricing and we certainly expect pricing to go up into the spring," he added.
Even as the price of widely used diammonium phosphate, or DAP, adjusts to this season's market dynamics, the long-term trend is undeniably bullish. Growing demand for high-quality food in emerging economies is expected to keep demand for all three major crop nutrients - nitrogen, phosphate and potash - rising over the coming decades.
For that reason, producers are scrambling to add capacity and that could hurt Mosaic and its North American rivals - Potash Corp POT.TO (POT) and CF Industries (CF) - over the medium term, even if phosphate pricing strengthens ahead of spring plantings.
Pricing over the next three years could come under pressure as production from the huge Ma'aden phosphate project in Saudi Arabia ramps up. On top of that, Morocco's state-owned OCP, the world's largest phosphate rock miner, is expanding both its phosphate rock and finished fertilizer production capacity.
In a recent note to clients, Lazard Capital analyst Edlain Rodriguez warned that capacity creep from Ma'aden, along with rising raw material costs, could keep both DAP prices and profit margins in check.
"We see limited upside in near-term prices as Ma'aden ramps up production in 2012 and 2013, with production increasing from 400,000 tons in 2011 to nearly 2 million tons in 2012," he said.
To be sure, analysts believe DAP prices won't collapse under the weight of the extra capacity, as global demand for the fertilizer is still growing at a steady pace.
"Average DAP pricing will probably decline, because you are going to have that much more DAP in the market, but I don't think Ma'aden is going to be massively interfering. I don't think it's going to be a crusher for DAP markets," said Neivert.
CORN PRICES DRIVE DEMAND
For the time being, corn prices, a crucial driver of crop nutrient demand in North America, may aid Mosaic's cause. Prices had dipped below $6 a bushel in recent weeks, but weather-related concerns have pushed prices back above the $6 mark over the last two weeks.
"It's all about the corn price," said Ticonderoga Securities analyst Mark Gulley. "The corn price drives both equity prices and fertilizer selling prices."
Dealers have also stayed on the sidelines because they are wary of placing orders at higher prices, as many of them had to book huge writedowns on inventories the last time DAP prices collapsed during the economic meltdown in 2008, said David Dow, owner of Dow Fertilizers, a dealer near Edmonton, Alberta.
"My first knee-jerk reaction is they're just doing this to keep prices up," said Dow. "I'd be surprised if the price didn't go up."
U.S. DOLLAR IMPACT
Mosaic's move, while modest, should be all that's needed to support prices, analysts say. As a result, Potash Corp and CF Industries are unlikely to make similar cuts.
"I don't think you'll see much," said Neivert. "You'll probably see modest curtailments by others, but they won't say anything about it because they won't be material enough to make an announcement about."
A strong dollar may prove a more significant hurdle for U.S. and Canadian fertilizer producers, says independent analyst Chris Damas. Their products would become less competitive in overseas markets if an escalation of the euro zone's sovereign debt crisis pushes up the greenback.
"A strong U.S. dollar could hurt North American fertilizer exports over the coming year, as the currencies of key emerging markets like India and Brazil have weakened, making it harder for farmers in those markets to afford high-priced fertilizers," he said.
(Additional reporting by Thomas Polansek and Ernest Scheyder; Editing by Frank McGurty)
Comment