CF Industries OUTLOOK
“Looking to the spring planting season, the fundamentals that drove our strong 2007 performance look even better for the farm economy and the company in 2008,” CF Industries’ Wilson noted.
“Prices for most major crops remain at record or near-record levels, providing an incentive for farmers to maximize planted acreage and to optimize fertilizer application this spring. And despite today’s high fertilizer prices, these crop prices clearly should support excellent farm economics in 2008, coming on the heels of 2007’s record farm income,” he commented.
Predictions from some agricultural economists point toward lower corn acreage in 2008, with expectations generally for 88 million to 89 million acres, down from the near-record 93.6 million acres planted in 2007. Putting that into perspective, the planned acreage would still be well above the 79.1 million acre average planted during the 1997-2006 period.
Wilson also noted that the United States Department of Agriculture is predicting increased acreage for other nitrogen-consuming crops such as wheat and sorghum in 2008. Both crops are enjoying strong prices, and increased acreage for them could reduce any negative effect on nitrogen demand caused by the expected reduction in corn acreage. Strong crop prices are also expected to push up nitrogen application rates for corn and other crops as farmers attempt to maximize yields.
Wilson added that corn demand for ethanol production is expected to increase by 30 percent from 2007 levels this year, with much of the increase required to meet federal mandates under the Renewable Fuels Standard. Margins on ethanol production are currently below the record levels achieved last year, but they remain positive.
In phosphate, the worldwide supply/demand balance is expected to remain extremely tight over the next several years, suggesting strong demand and pricing for phosphate fertilizers.
CF Industries, along with other phosphate producers, is facing significantly increased input costs, especially for sulfur. Increased sulfur demand from the phosphate and metals industries, coupled with outages at several major Gulf Coast refineries that produce sulfur, have tightened the market. The company believes the supply/demand balance for sulfur could become more favorable to users later in 2008 when refineries are expected to be producing sulfur at higher rates.
“Looking ahead to the first half of 2008, questions remain regarding corn acreage, sulfur cost, and the strength of the general economy. However, taken against the backdrop of low grain stocks worldwide, high grain prices, record farm economics, and robust global markets for nitrogen and phosphate fertilizers, we’re looking at the first half of 2008 with excitement and optimism. We’re well positioned to serve our customers in this strong agricultural market,” Wilson added.
