La Niña ready to haunt farmers’ wallets
Harvesting activity is fast approaching for the Heartland with drought stress likely to lead to an early start of the combination of activities for many growers. Despite the slight cap in wholesale input prices over the past few weeks, the seasonal increase in demand expected during the fall application season will likely cause prices to rise again, especially with another weather event. La Niña on the horizon.
NOAA expects another La Niña weather pattern to emerge this fall due to cooler-than-normal ocean temperatures in the Pacific Ocean. This will be the second time in the past year that the weather in La Niña has influenced farmers’ activities on the ground, and the outlook is not so optimistic for growers whose fields are planted late.
The increase in precipitation is characteristic of an autumn season during La Niña. And while farmers in the Upper Midwest would welcome any additional soil moisture, growers in the Eastern Corn Belt have had more than their fair share of showers this year.
The likelihood of excessive rains in the east will increase with the onset of fall, which could delay harvest in late-planted fields and increase drying times. This could affect farmers’ portfolios and harvest schedules if early action is not taken.
The availability of propane can also be an issue if a wet fall ensues. Inflationary pressures and low inventories are expected to keep costs high before harvest. Propane inventories are rebuilding after an active export season earlier this year, but weekly inventories remained almost a quarter lower than the same period a year ago.
Farmers who cannot start harvesting early this year should consider increasing the on-farm propane supply as quickly as possible. Farmers compete with residential demand for heating fuel as the cold weather approaches. And with the Delta variant sending more workplaces back to home offices, competition for the little propane available will be stiff this fall.
Nitrogen reserves are shrinking
Maintenance downtime at anhydrous ammonia plants in the United States this summer will tighten pre-harvest supplies. Global nitrogen supplies continue to tighten as global acreage expansion increases in this period of high commodity prices.
Some early offers reported at the wholesale level suggest that anhydrous prices may be offered at a discount despite tight global supply prospects. Nutrien’s plant based in Trinidad helped offset some price pressure amid a plant shutdown in Saudi Arabia.
But demand for anhydrous ammonia from the Black Sea and South America on the continued expansion of acreage will continue to limit the opportunities for price reductions in the global anhydrous market.
China’s ban on urea exports last week could further tighten global nitrogen supplies. In the near term, nitrogen prices don’t appear to show any signs of falling, which could cause more farmers to wait until spring to book 2022 applications.
Ever higher phosphate costs
China’s major fertilizer producers are temporarily suspending exports of phosphate and urea, which could send major buyers India and Pakistan to search for alternative sources that the United States has relied on. the continuation of their tariff dispute with Russia and Morocco.
China is the world’s largest producer of phosphate. Prior to this announcement last week, there was some optimism that Chinese supplies could help offset phosphate shortages in the United States, as phosphate imports from major Russian and Moroccan producers all but disappeared as a result. of last year’s countervailing tariff dispute.
Fertilizer costs hit record highs this year in China as a government-sponsored acreage expansion increased demand for inputs. The recent floods in Henan province (central China) have also blocked fertilizer production. Rising production costs and increased export demand due to the increase in global area this year have also played a significant role in declining Chinese phosphate supplies.
Farmers remained somewhat optimistic that phosphate prices could see some relief before the harvest as new international sources increase their maritime presence to the United States.
As the fall application season approaches, farmers will be well served in determining their projected profit margins for 2022 to determine if they are best served by reserving supplies of phosphate as early as possible. It is not yet known how soon, if at all, phosphate prices will calm down, but whether farmers are confident in their income projections and feel comfortable waiting for a chance to lower prices afterwards. New Years, it might be worth the wait.
Farmers pay for global turmoil
The potash prices listed by Illinois retailers have skyrocketed amid international political upheaval, rising nearly a quarter in the past two weeks to $ 600 / tonne. The latest potash price spike is largely attributed to recent economic sanctions imposed on key producer Belarus by the European Union, UK, US and Canada after the Belarusian government jailed top political protesters. plan.
Potash suppliers were already tight before the sanctions, which will further restrict international flows of potash fertilizer. Belarus is one of the largest producers of potash in the world. It is still unclear whether US growers Nutrien and Mosaic will have the capacity to increase production in time for the fall application season.
Compensatory tariff disputes continued to drive up phosphate prices. New disputes over the dumping of UANs imposed on Russia and Trinidad and Tobago by the United States have pushed up prices over the past two weeks and may also increase UAN prices.
Growers who are awaiting spring prices in the coming weeks will need to set their profit and cost expectations for 2022 fairly quickly over the next two weeks to decide whether the availability is worth the current high input costs or whether they can afford to take a bet and wait for the prices. to moderate in the increasingly volatile post-pandemic era.
Farmers may not be able to afford to wait until China takes the first step this fall to stimulate export demand enough so that grain revenues can offset higher input costs. Global economic uncertainty continues to weigh heavily, so if any profit opportunities present themselves during the first days of harvest, don’t hesitate to seize them.