INSIGHT: Spring in US heralds large sowings and significant fertilizer consumption

HOUSTON (ICIS)–Amid winter’s slow retreat, US farmers are ramping up for another round of large acreage  plantings, while the fertilizer market has seen values climb and supplies tightening – all of which are setting the stage for a very engaging spring season.

As planters start their trek over millions of acres in the coming weeks, it raises expectations that growers will thereby consume significant amounts of nitrogen, phosphates and potash.

This effort to maximise yields comes as crop prices are favourable, even as fertilizer prices have recently had steep increases.

Values for crop nutrients have climbed as supply is limited because of reduced import availability, logistical challenges and recent production outages due to extreme winter weather.

The price hike has also been supported further by improved farm economics and expectations demand could outstrip supply at some point.

Having received government assistance, and with prices for their corn or soybeans at a higher point than in 2020, farmers are encouraged to get the season underway.

As a market source said “fertilizer should be very strong in response to strong grain prices. Nitrogen and phosphate have already run hard but think they remain firm through the spring season and we finish up the spring season with minimal inventories.”

“Potash is a bit murkier and it has not been able to achieve the price momentum of the other fertilizers.”

The US Department of Agriculture (USDA) also is calculating more corn and soybean sowings.

Corn plantings are forecasted at 92m acres, up from 90.8m acres planted last year, while soybeans are expected to reach 90m acres, a rise of 6.9m acres year-on-year.

The USDA said the gain in soybeans is encouraged by “new-crop soybean futures prices relative to corn, supported by strong Chinese demand and the tightest stocks-to-use ratio since 2013-14.”

In comparison, the fertilizer industry on average expects the sowings to slant a bit more in the favour of corn with market participants project plantings between 91-94m acres.

For soybeans the market is close to the USDA’s notion with sowings between 89-91m acres.

“The record for combined corn and soy acres was set back in 2018 at 180.4m acres so I am expecting that to be broken. Corn would likely be higher, but the US is walking a delicate line where it could run completely out of soybeans by late summer,” said a trader.

“Therefore, the prices will likely rally for soy to ration demand and buy acres. Corn will not be left too far behind so upward price momentum is likely there as well.”

Corn planting estimates
USDA	92m acres
Fertilizer market	91-94m acres
Producers	90-92m acres
Soybean planting estimates
USDA	90m acres
Fertilizer producers	89-91m acres
Producers	89-90m acres

For the fertilizer industry, the spring presents new opportunities. And after having emerged fairly well from the challenges of last year, the market is envisioning that 2021 will be more on a normal course, with such obstacles present like tight inventory, demand surges and logistical woes, which are familiar this time of year.

As a source said “I think a lot depends on weather, on when guys get planting going. There was strong fall NH3 [ammonia] run which is helpful to corn, especially given current nitrogen levels. I think soybeans do take a chunk of acres but there will be a lot more acres in total planted this year vs last year.”

Some think a later start may still occur, as rainy weather has settled in again into the upcoming forecast, but that perhaps this gives the US time to catch up on its import deficit.

“An early spring isn’t going to happen so the question then becomes how far behind is spring? The US needs an additional plus or minus 1m tonnes of urea to balance for this spring, that includes current estimates of future vessels,” said a market participant.

“We are doing a lousy job of bidding tonnes away from the Brazilians and we are running out of time. However, the later the spring the more time we have to correct for this shortage.”

It is thought that phosphate and potash consumption would suffer the most if the window of applications is shortened, with it likely having repercussions into the refilling period.

“P and K is all about the weather. It’ll be great if the farmers don’t run out of time. If they have to skip P and K, then the summer-fall fill will suck and we’ll have a harder reset,” said a market source.

Insight by Mark Milam