(This story appears as part of a special package
highlighting the global potash industry.)
* Farmers testing soil before buying fertilizer
* Late harvest could squeeze autumn demand
* U.S. shift from soy to corn could boost potash demand
(In U.S. dollars unless noted)
By Rod Nickel and Michael Hirtzer
WINNIPEG, Manitoba/CHICAGO, Sept 22 Around Ron
Bonnett's farm near Sault Ste. Marie, Ontario, farmers are busy
making complicated calculations to determine how much to spend
restoring soil nutrients for next year's crop.
The decision must take into account grain, fertilizer and
crude oil prices, as well as farmers' delicate give-and-take
relationship with the land. But it may ultimately rest on the
fate of this year's crop.
"If you haven't got the crop in the bin, or crop sold, it
could be difficult to buy the (fertilizer) product," said
Bonnett, vice-president of the Canadian Federation of
Agriculture. "To put it in one word, 'uncertainty' is the best
way to describe it."
North American farmers cut back on fertilizer purchases
last autumn as the price of potash, one of the most valuable
crop nutrients, nosed up to a record $1,000 a tonne.
Forecasts for North American demand this fall and next
spring are as variable as the weather forecasts. Cool weather
earlier in the year delayed the harvest in Canada and the
United States, raising concerns that frost will wreck crops
before farmers can harvest them.
Those fears have ebbed in recent weeks with warm, dry
But that uncertainty means farmers are looking warily to
next year's crop, Bonnett said. More Canadian farmers than
usual are testing their soil, trying to determine how little
fertilizer they can get away with applying this fall, he said.
"There's some core demand there, but I think farmers are
cutting it to the bare minimum."
U.S. farmers are also looking to save money on fertilizer,
said an industry source.
"These farmers have overapplied potash for many years.
Generally, they'll put on the minimum possible."
DEMAND COULD RISE
Farmers are happier with the current potash price of $460 a
tonne than they were with prices a year ago. Most realize they
can't cut back on potash indefinitely without hurting their
crop yields, said Craig Orr, director for market development at
Heartland Co-op in Des Moines, Iowa.
Autumn demand could prove strong if farmers escape a
crop-killing frost and if fertilizer prices weaken further,
said David Asbridge, president of St. Louis, Missouri-based NPK
Fertilizer Advisory Services.
"I think farmers are going to be feeling a bit better,"
Asbridge said, adding that grain prices remain relatively high
despite a recent decline.
"We're going into a fall season with the opportunity to do
much much better (fertilizer sales) than last year.
Asbridge sees farmers shifting U.S. soybean acres to corn
next year if big oilseed crops in the United States and Europe,
and renewed South American soybean plantings, put soybean
prices under pressure this autumn. More corn typically means a
need for more fertilizer, he said.
But if farmers harvest a record corn crop and the grain's
price sinks, some may limit input costs, Orr said.
This month, Citigroup lowered its rating on two big North
American fertilizer producers, Potash Corp of Saskatchewan
(POT.TO) and Mosaic Co (MOS.N) to "hold" from "buy." It cited
the likelihood of limited fertilizer applications among its
concerns [ID:nN14501206] and analyst P.J. Juvekar said U.S.
corn belt farmers are cutting spending as corn prices fall.
The smaller crops forecast for Canadian farmers could also
limit the rebound in potash demand next year, Asbridge said.
"If you're not taking much off the land, you don't have to
put as much (nutrient) back on it," he said.
Rising prices for light crude CLc1 could also have an
impact, with higher fuel costs limiting how much farmers could
pay for fertilizer.
On the other hand, higher crude supports corn and oilseed
prices because they are used for biofuels, so farmers in theory
could afford to pay more for fuel, Asbridge said.
(Editing by Frank McGurty and Janet Guttsman)