Expectations For Fall
This year we're coming off a summer, or a year, when we had record droughts in
the U.S. and prices went up and farmers responded with very large acreage
amounts. We had a wet spring and that has definitely hurt some prospects, but
it still looks like this year we'll wind up with close to a record corn crop.
Soy should also be a very large harvest.
There is some concern because of the late planting of soy, which
may lead to frost issues and the crop not quite developing as people would
like, but so far things look good. Prices in soy have held up reasonably well
and I think it bodes well for a large Latin American harvest. Brazil and
Argentina together are a bigger soy producer than the U.S. and that's
important in terms of where prices will head going forward.
Low Prices: Effect on
HALPERT: We do see prices moving lower on the ag side in terms of
corn and soy. Again, we've got to get through the harvest year and make sure
that we don't have a cold fall. But if that comes to pass, then I think
there are several companies in several industries that are going to feel a
little bit of pressure. The long-term outlook for ag is still pretty good,
but short-term equipment companies may feel some pressure because the
farmer is not quite feeling as flush
Again, it's been a couple pretty good years for the farmer, so
it's going to take more than one year on the equipment side, but that
will be something to look for. On the fertilizer side, here are some
industry-specific things going on that may change the way the farmer
reacts but for the most part, farmers will be little more cautious. The
one other thing to consider is, if prices move lower we’re likely to see
less acreage next year in corn, which should mean less nitrogen demand.
That's getting a little specific, but that's something we’re likely to
Activity in the Potash Market < /p>
HALPERT: In early August, the potash industry witnessed a
dramatic change in its structure. [I need to see video; this is awkward]
You had two pricing groups that worked a lot like OPEC has in crude oil.
The eastern European -- Russian and Belarusian group -- split up so it's
dramatically changed the way potash will get priced as we see it at this
point. The two could get back together, but right now you have a
commodity that's dramatically in surplus, you've got a commodity that is
way above the marginal cost of production, and you had a strategy where
they definitely sought price over volume. That's changed. You're going
to see volume over price with pricing moving lower.
Potash doesn't actually have that dramatic an
effect on the farmer or the industry:t's not a major input. China and
India under-apply, but potash is more about protecting the downside on
yield rather than promoting yield. Nitrogen is more about promoting
the yield, so I don't think you're going to see a dramatic increase in
volume. I think we will see some increase in volume on the potash side,
and ultimately it doesn't mean that you'll see greater yields for the
whole globe, but rather marginal
Possible Catalysts < /strong>
of the exciting things about the ag space right now is that lower prices
should elicit an acreage response from the farmer. We may have low corn
prices this fall but hopefully by next spring, prices will bottom out.
Less acreage will set up for potentially higher prices. This could
benefit a lot of companies in the ag space: the fertilizer producers,
the retail companies the processors, the handlers and people involved in
logistics. All those companies have seen less crop to work with because
of the drought, and hopefully we get a big crop next year, and the
more they have the better. As we go forward, there are some positives
to look for in the ag space.
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