FocusFertilizer demand to persist despite severe drought

25 July 2012 17:56  [Source: ICIS news]

HOUSTON (ICIS)--The drought affecting a broad swath of the US may be the worst in more than half a century, sources said on Wednesday, but it may not have much of an effect on fertilizer demand or prices.

With extreme heat and dry conditions continuing to batter the central US from Colorado to Ohio and from Arkansas to Michigan, the National Climatic Data Center (NCDC) said the drought is the sixth worst since records began in 1895.

The NCDC is a unit of the National Oceanic and Atmospheric Administration (NOAA).

According to the data, 54% of the nation was in a drought in June. That compares with 57.6% in December of 1956, and the 79.9% in July of the dust bowl year of 1934.

“The current drought in the US is not expected to have a significant negative impact on the fertilizer industry in the near term,” said Kathy Mathers, spokeswoman for Washington, DC-based The Fertilizer Institute (TFI).

“The drought will likely depress US corn production this year, resulting in lower global stocks, higher corn prices and an incentive for growers to plant another big corn crop in 2013,” Mathers said.

“The bottom line for the fertilizer industry is that corn can’t be grown without the availability of nitrogen and other nutrients, which translates to a strong demand for fertilizers going forward,” said Mathers.

Earlier, an investment firm made similar comments.

Fertilizer consumption in the US is unlikely to decline after the current drought in the midwest, Citi Investment Research said.

"For phosphate and potash fertilizer producers, the drought may result in farmers lowering their fertilization programmes due to less nutrient removal this fall, although we believe this could be more than offset by higher planted acres in Latin America later this year and in the US in 2013," Citi said.

The National Weather Service (NWS) has forecast increasingly dry conditions over much of the US, with no reprieve in sight.

In response to the worsening conditions, US Agriculture Secretary Tom Vilsack on Monday announced new flexibility and assistance in the US Department of Agriculture's (USDA) major conservation programmes to get much-needed help to livestock producers.

Vilsack also announced plans to encourage crop insurance companies to provide a short grace period for farmers on unpaid insurance premiums, as some farming families can be expected to struggle to make ends meet at the close of the crop year.

"Beginning [Monday], USDA will open opportunities for haying and grazing on lands enrolled in conservation programmes while providing additional financial and technical assistance to help landowners through this drought," Vilsack said.

The assistance announced uses the Secretary of Agriculture's existing authority to help create and encourage flexibility within four USDA programmes: the Conservation Reserve Program (CRP), the Environmental Quality Incentives Program (EQIP), the Wetlands Reserve Program (WRP) and the Federal Crop Insurance Program.

“The drought has reached crisis proportions in certain parts of the country and this flexibility will provide a measure of assistance for the farm and ranch families who need it,” said American Farm Bureau Federation (AFBF) President Bob Stallman.

“We appreciate the responsiveness and understanding exhibited by Secretary Vilsack during this drought-related emergency, and we are hopeful he will consider additional action for specific areas of the nation where additional grazing prohibitions are in place,” Stallman said.

In Texas, the state's Commission on Environmental Quality informed water rights holders on Tuesday that the agency may need to administer water rights on a priority basis, if drought conditions persist.


By: Frank Zaworski
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