Wisconsin Crop Management Conference Fertilizer Market Outlook

Transcription

1 Wisconsin Crop Management Conference Fertilizer Market Outlook Lara Moody, P.E. Director of Stewardship Programs The Fertilizer Institute January 15,

2 What Drives the Market? Global Aspect of Industry Product Demand Production Costs Transportation Costs Product Supply

3 Global Aspects of Fertilizer

4 90% 80% Share of World Crop and Nitrogen FerElizer Products Traded, 2011 Like the major crops, the primary fertilizer materials are commodities and are traded globally 79% 70% share of global production which is exported 60% 50% 40% 30% 20% Average = 18 % 13% 23% 37% 38% 22% 25% Average = 40 % 36% 37% 48% 60% 10% 8% 0% Rice Corn Wheat Co9on Soybeans Ammonium Nitrate Urea Nitrogen SoluEons Ammonium Phosphates Ammonium Sulfate TSP Potash Source: U.S. Department of Agriculture and International Fertilizer Industry Association. Averages computed as total exports (crops or fertilizer) divided by total production.

5 U.S. Imports of Primary Plant Nutrients million short tons nutrients Source: U.S. Department of Commerce, International Trade Commission Nitrogen Phosphate Potash

6 Demand

7 World Grain Yields vs. Global Nutrient Use Metric tons grain per acre Correlation Coefficient = 89.4% : - Population UP 58% - Global grain production UP 57% - Harvested acreage DOWN 4% Yield (up 64%) Nutrient Use (up 57%) ** Nutrient Use is Driving the Increase in Grain Yields, Resulting in Increased World Grain Production, While Saving Land! Million metric tons nutrient (N + P2O5 + K2O) billion (1980) ç == Additional 2.57 billion people ==è 7.02 billion (2012) Source: WASDE, USDA; IFA, BLS. * Includes wheat, rice and coarse grains (corn, oats, barley and sorghum). ** Grains account for an estimated 50 % of global nutrient use.

8 The Lion s Share of Global Nutrient Demand, 88 Percent, is Outside the United States Global Nutrient Consumption FY 2010/11 Rest of World 37% China 29% India Brazil 16% 6% US 12% Source: International Fertilizer Industry Association (IFA).

9 Estimated U.S. Nutrient Use By Crop /11 Other 27% Rice 2% Cotton 5% Corn 49% Soybeans 6% Wheat 11% Source: Computed from data reported by USDA and AAFPCO/TFI.

10 Production Costs

11 P Mining Process

12 How important is natural gas to N production? 95% Natural Gas as a Share of Total Anhydrous Ammonia Production Cost 90% 85% 80% 75% 70% : $ $8.84 MMBtu ~40% for fuel ~60% for feedstock 65% 60% $- $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11 $12 $13 $14 $15 Price of Natural Gas - $/MMBtu

13 The Shale Revolution! Source: Washington Post, April 12, 2012, page A13.

14 Cumulative U.S. Ammonia Plant Closures vs. Natural Gas Prices Ammonia Plants Restarted: 2009 LSB Prior, OK CF (Ampro) Don., LA 2011 OCI N Beaumont, TX 2013 PCS N Geismar, LA number of ammonia plants closed natural gas price - $/MMBtu Source: Natural Gas Week, Blue, Johnson and Associates, and The Fertilizer Institute.

15 Rail Overseas Shipping Transportation Costs

16 Current Outlook Based on Drivers

17 World Nutrient Consumption N P2O5 K2O million metric tons nutrient / / / / / / / / / / /15 Historical Estimate Forecast Source: IFA Fertilizer Outlook

18 22 U.S. Nitrogen Sources - Ammonia Production and Total N Imports 60% % 50% 45% million short tons N % 35% 30% 25% 20% 15% 10% 5% Imports as share of Total % Ammonia Production Nitrogen Imports Imports as share of Total (right scale) Source: U.S. Department of Commerce, International Fertilizer Industry Association and The Fertilizer Institute.

19 Lower natural gas prices are resulting in renewed investment in North American Nitrogen Industry The current favorable natural gas price environment in North America has generated renewed interest in expanding current nitrogen-related production capacity and in building new plants. A Green Markets suumary (December 31, 2012) reported 38 potential projects by 26 companies at various stages of development. Of the projects listed, some of which included expansions of several nitrogen materials: - six were complete or nearly complete - four were in the works or had broken ground - five were listed as moving ahead. However, 23 of the projects, or more than 60 percent, were categorized as proposed some of these projects will move forward and others will not.

20 25 U.S. Consumption of Primary Plant Nutrients 20 million tons nutrients Source: Commercial Fertilizer Reports, AAPFCO & TFI Nitrogen Phosphate Potash

21 Corn Demand for Ethanol 6 Billion bushels '2000/01 '2001/02 '2002/03 '2003/04 '2004/05 '2005/06 '2006/07 '2007/08 '2008/09 '2009/10 '2010/11 '2011/12 '2012/13* '2013/14* '2014/15* '2015/16* '2016/17* '2017/18* Source: Rich Pottorff, Doane Advisory Services.

22 U.S. Plantings of Corn, Soybeans and Wheat 120 Corn Soybeans Wheat million acres planted Source: USDA NASS Quick Stats, downloaded Jan. 13, 2014

23 16 U.S. Corn Production and Stocks million bushels million bushels Source: World Agricultural Supply and Demand Estimates, USDA Prod. Ending Stocks

24 FERTILIZER MARKET DRIVERS Domestic Nitrogen Production Rises Over Time and Displaces Some Imports; but Imports Will Continue to Play a Role in the Domestic Nitrogen Market Growth in Corn Demand for Ethanol Production Comes to an End as the Blend Wall is Reached - Ethanol demand doesn t go away it just doesn t continue to rise; Domestic Corn Production Exceeds Demand, Resulting in Higher Ending Stocks and Lower Corn Prices; Domestic Nutrient Demand set to decline Modestly as Corn Acreage Falls in Response to Lower Corn Prices; But Nutrient Demand in the Rest of the World Continues to Grow, More than Offsetting and Potential Decline in Domestic Nutrient Use

25 Tonnage Assumptions: Changes in Major U.S. Crop Acres Planted Mil. Acres 120 Mil. Acres Corn Soybeans Wheat Cotton (right scale) Source of Acreage Data: , USDA; , Doane Advisory Services. Corn, wheat, soybeans and cotton accounted for an estimated 73% of total nutrient use in FY2010/11. 0

26 USA Forecast Nitrogen Demand million short tons N / / / / / / / / / / / Actual Estimate Forecast Source: AAPFCO and The Fertilizer Institute (TFI), 2004/ /11; TFI, 2011/ /15.

27 USA Forecast Phosphate Demand million short tons P2O / / / / / / / / / / / Actual Estimate Forecast Source: AAPFCO and The Fertilizer Institute (TFI), 2004/ /11; TFI, 2011/ /15.

28 USA Forecast Potash Demand million short tons K2O / / / / / / / / / / / Actual Estimate Forecast Source: AAPFCO and The Fertilizer Institute (TFI), 2004/ /11; TFI, 2011/ /15.

29 Nutrient Management Efforts

30 Increased Scrutiny of Land and Resource Management Negative headlines effecting public opinion Potential rulemaking affecting agriculture Environmental organizations litigating to force regulatory action Nutrient

31 4R Nutrient Stewardship Improve agricultural production while contributing to social well being and minimizing environmental impacts (benefits water and air quality) 4R represents the use of fertilizer Best Management Practices to ensure: the right source at the right rate at the right time in the right place

32 4R Nutrient Stewardship Match nutrient supply with crop requirements and to minimize nutrient losses from fields BMPs effecting fertilizer are site specific Prevention vs. mitigation Fertilizer BMPs help prevent nutrient losses from occurring 4Rs work in conjunction with other conservation practices and green infrastructure Mitigation practices are necessary, but don t save farmer money and increase productivity like fertilizer BMPs

33 Educational Tools & Resources IPNI 4R Plant Nutrition Manual 4R Pocket Guide, outreach materials, and videos CCA 4R Webinar Series education/4r-approach

34 4R Education Modules 10 modules available (free) covering Site Specific Nutrient Management relative to 4R Addresses fertility, economics & environment Covers: Fertility Overview N, P, K S, Mg & Ca Micronutrients ph & Lime Soil sampling Economic & Environmental Issues

35 4R Research: Currently over $1.2M contributed by industry & stakeholders Two RFPs released in October BMP meta-analysis (Dec. 15) Research & Demo (Jan. 31) Review and selection by Technical Advisory Group and Fund Management Committee Additional RFPs to be released in Under the Funding link