US CF Industries expects typical spring demand to be weighted to second quarter

HOUSTON (ICIS)–US producer CF Industries said as it looks towards the first half of 2023 it believes typical spring demand is going to be weighted to the second quarter as buyers have taken a wait-and-see approach to nitrogen procurement but it does expect high corn acreage will be sowed and fertilizing to be significant.

Speaking during its quarterly earnings release this week, the producer said the last 18 months have been a particularly volatile period for the fertilizer industry as high energy prices, geopolitical events and economic weakness have impacted both nitrogen production rates and nitrogen prices.

CF said in the near-term they expect continued volatility in the global nitrogen market and that buyers have continued what they termed as a “just-in-time approach” to purchasing and it acknowledged that it was not unusual in this market to see farmer hesitation when nitrogen prices are elevated and spring applications are distant.

“This buyer behavior has persisted longer than normal as declining global prices reinforced the wait-and-see approach,” said Bert Frost, CF Industries senior vice-president.

Yet Frost said over the last two weeks retailers and wholesalers are starting to come back into the market drawn by attractive price levels.

“The decrease in global nitrogen pricing has improved farmer economics dramatically and should spur demand globally that was discouraged at higher prices,” Frost said.

“We expect significant demand to emerge in North America in the coming weeks as the value chain moves into catch-up mode that will likely last into and through the second quarter. We believe inventories are lower at the farm and retail level given the extent of the Q4, Q1 purchasing slowdown.”

Frost said US nitrogen imports since July are lower year over year, while nitrogen exports were significantly higher which leads the producer to believe there is a good amount of product movement yet to occur and further purchasing required still to meet spring needs.

“From a longer term perspective, we believe that industry fundamentals continue to point to a tight global nitrogen supply and demand balance,” Frost said.

For this spring, CF said it is projecting there will be 92m-93m acres of corn planted in the US along with strong wheat, cotton and canola plantings across the rest of North America, and that it will take at least two more growing seasons at trend yields to fully replenish global stocks.

“When you look at what the additional corn acres we targeted in our remarks of 92m-93m and the additional wheat acres of probably 5m acres, you’ve got, I’d say, 300, 000 to 400,000 tons of additional demand on top of the pasture acres that will be fertilized,” Frost said.

“So good demand profile going forward. I think the imports generally tend to be balanced. And we’re well positioned with our three urea plants on the coast and then the interior to serve that need.”

In other plant news CF said the blue ammonia project at Donaldsonville, Louisiana, remains on track for start-up in early 2025 and that engineering activities and procurement of major equipment are in progress.