Thursday, November 17, 2011

Another feckless prediction...  

Fertilizer prices may have peaked. 

No, seriously. 

Aaron and I are revising our P & K apps in light of the outcome of our cash rent negotiations. My pattern has been to simply slow the buildup on fields that need it.

But whether the Fertilizer Oligopoly can repeat their slowdown to limit supplies is to be seen.

According to the International Fertilizer Industry Association (IFA), there are currently 250 fertilizer production capacity expansion projects under way globally and planned investments of approximately $88 billion through until 2015, including huge projects in China, the Middle East and Latin America.
Among the minerals, nitrogen production capacity is growing particularly quickly.
Capacity is seen 19% higher at 229.6 mmt by 2015, driven by expansion in China, India and Latin America, where authorities are seeking to increase self sufficiency and in Africa, where there are the most accessible deposits, according to the IFA.
Meanwhile, regarding urea, the Middle East and North Africa are set to become more important because of the energy cost advantages.
"New capacity is being built to take advantage of cheap gas in Qatar Saudi Arabia and Iran, among other spots," said Calum Findlay of UK fertilizer merchant Gleadell Agriculture.
Another area in which heavy investments are being made is potash and, as a result, large potash surpluses are expected from 2015 onward, according to the IFA. Canada will have the biggest surplus, providing a readily available source of potassium for U.S. farmers. By 2015, North America will produce 39% of the world's potash.
In the area of phosphates, rock mining capacity is expected to grow 26% between 2010 and 2015 with the largest growth areas in Africa, which has the most readily accessible reserves.
In the short term, phosphoric acid supply remains tight but that should ease in the next three to four years as 34 new plants are planned for completion between 2010 and 2015.
With food and feedstuff prices still near all-time highs, demand for fertilizers remains buoyant. But affordability will keep a lid on demand. That's because, at current levels, fertilizer prices are around 30% higher than what is considered a natural equilibrium point against agricultural commodity prices, according to CRU analysis. [More]

Another curious development is the glut of crude in the Midwest and the unusual reaction.

The decision to reverse the flow of a key oil pipeline should alleviate a supply bottleneck that has trapped crude in the Central U.S. for the better part of this year.
It will also raise the price of oil in the U.S., and could restore some of the lost legitimacy of the main U.S. crude benchmark.
Benchmark crude on the New York Mercantile Exchange jumped above $102 a barrel after Wednesday's announcement that Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD) would reverse the direction of the Seaway pipeline to transport crude from the oil hub of Cushing, Okla., to refiners on the Gulf Coast.
The reversal should help drain the brimming tanks of oil in the Midwest, where elevated inventories and a shortage of outgoing pipelines have depressed the price of crude on the Nymex, also called West Texas Intermediate, compared with Europe's Brent benchmark for much of this year.
Pending regulatory approval, the 500-mile pipeline could ship an initial 150,000 barrels of oil a day from Cushing to the Houston-area refining market by the second quarter of next year, Enbridge and Enterprise said.
After pump station additions and modifications, the capacity could rise to 400,000 barrels a day by early 2013, the two companies said.
That flow should help reduce oil inventories in the Midwest, which have been elevated for much of the year. Over the past 12 months, commercial crude held in storage in the Midwest has risen 4% to 91.2 million barrels last week, according to Department of Energy data.
"It enables the increasing amount of oil production to get to the refining centers on the Gulf coast in an economical way," said Andy Lipow, president of the Houston oil-industry consultancy Lipow Oil Associates.
Seaway isn't the only pipeline in the works that will transport crude out of the Midwest. TransCanada Corp.'s (TRP) expansion of its Keystone pipeline, which carries Canadian crude into Cushing, will offer an outlet to the Gulf Coast as well. [More]
I am embarrassed to say I thought they were one-way pipelines.


Anonymous said...

John where your rental costs down that much that you will change fertilizer plans?

John Phipps said...

Good one.

Just the opposite.