Bumper Corn Crop Puts More Pressure on Potash Industry

Investors hoping for a turnaround in the potash industry in the near-term appear to be out of luck as the U.S. Department of Agriculture has revised its corn production estimates to near-record highs.

The USDA has upped its forecast for corn in 2009 to about 12.8 billion bushels, compared with previous estimates of 12.3 billion and also higher than market consensus of 12.5 billion bushels. If the USDA estimates hold out, this bumper crop would be the second-largest on record.

Figures from the Ontario Corn Producers' Association show a bushel is typically about 56 pounds or 25.4 kilograms, and contains 72,800 kernels.

Even worse for potash producers, weather conditions are expected to be favourable for crop growth in the next few weeks, putting even more pressure on the fertilizer industry.

However, John Redstone, analyst with Desjardins Securities, does see cause for optimism.

Corn futures have held steady at or above the $3.25 a bushel mark, above the June low of $3.04. While less than half of the high of $7.64 a bushel price from last year, the latest corn prices are a good sign.

"This leads us to believe corn prices may have bottomed," Mr. Redstone said in a note Thursday. "The prices for foodstuffs have to increase before farmers are compelled to increase their purchase of fertilizers."

Mr. Redstone expects potash prices to rise to $600 a tonne by 2011, as pricing for corn and other foodstuffs firms up.

Comments

[Ship:]

I good corn crop is great for the fertilizer industry. It puts money in the farmers pocket to purchase product for next year. Get a clue.,

Aug 14 10:44 AM

[Deltaxray7:]

Well, spring in the southern hemisphere will be here soon.
They not have the same results as the U.S. so time will tell.

It doesn't seem to me that lately product "need" has anything to do at all with stock prices.
The market seems to be driven by emotions of the investors
and have no scientific methodology at all.

Aug 14 11:01 AM

[Barry Isaacs:]

Corn plantings represent about 14% of global potash applications but that percentage is declining. Fruits and vegetables, on the other hand, represent about 20% of global potash applications but that percentage is rising. Fixation on the rise and fall of the price of corn, therefore, is myopic.

Aug 16 07:01 PM

[MexCom:]

The USDA Crop Report on Friday (Sept.11) showed a forecast of 2% more corn than last month's, and predicts the highest yield per acre on record. Depending on frost conditions, if less severe than normal, add on at least an additional 1% to the crop, IMHO. I haven't analyzed the fertilizer situation but Nat. Prices are very low and could increase demand for complimentary fertilizer inputs such as potash. A better play on the bullish side is to buy the corn processors. Plenty tortillas are in prospect for the Mexicans and improved milling margins for Gruma - GMK. Domestically, COP and ADM are to benefit from a large corn crop.

Sep 13 01:05 PM