US CF said urea proven to be resilient during pandemic, projecting strong US ammonia run

Mark Milam

06-Nov-2020

HOUSTON (ICIS)–CF Industries (CF) said despite the pandemic that the global nitrogen market has proven to be incredibly resilient and it has seen demand for agricultural applications grow, with the post-harvest ammonia period in the US projected to be strong.

Speaking during the company’s earnings conference call, CF senior vice president Bert Frost said looking towards 2021 the producer expects solid demand across the world, led especially by North America, India and Brazil.

“We also project improving price dynamics as the global cost curve steepens with rising energy prices and wider energy spreads compared to North America,” said Frost.

CF is also counting on US farmers, who are closing in now on completion of the 2020 harvest, to sow significant amounts of corn once again this coming spring, which is seen as translating into good levels of buying for nitrogen fertilizers.

“We are projecting a healthy level of corn planting as well as increases in wheat and canola plantings in North America, supporting good demand in the region. We are forecasting approximately 90 million planted corn acres in the United States in 2021,” Frost said.

“This is in line with levels over the last 10 years and supported by improved farm economics due to higher corn futures, government payments and lower input prices.”

He added that if weather is favourable through the fall, CF is projecting there will be a strong ammonia run because of the improved farm economics, and due to attractive ammonia values when compared with other nitrogen offerings.

CF also expects industrial demand, which has been impacted by the economic slump during the pandemic, will continue to recover. It said demand for feed grade urea and diesel exhaust fluid has also stayed relatively resilient over this year.

Questioned whether a strong fall period impacts the amount of spring ammonia demand, CF CEO Tony Will said if a grower applies more in fall they typically require less in the spring, but for the producer it is not a question of what time of the year it is placed.

“We really like ammonia going down, whether it’s in the fall or the spring, because we have a differential asset base that allows us to realize terrific values for ammonia. And if you end up with poor ammonia application, then we end up having to export ammonia and the price realization for that tends to be lower,” said Will.

“We sell everything that we make over the course of a year. So we either get it in the fall or we get it in the spring, but basically it’s the same number of tons ultimately that go down.”

Frost said one aspect to consider is the advancement that technology has made towards the task of farms putting ammonia into the ground after harvesting is completed.

“With precision ag, the impact to fall ammonia is less than it was 20 years ago where you’re actually probably applying less on that one pass-through and doing multiple applications, whether that be some ammonia in fall or spring, and then urea or UAN on top. So the impact of a negative fall is less,” Frost said.

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