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This year's fertilizer market made manufacturers happy to hear. Last month, the Potash Corp of Saskatchewan, Canada, announced that its revenue in the third quarter of this year reached US$130 million, an increase of 73% over the same period of last year, and sales increased by 15% to US$938 million. Terra Industries, a well-known nitrogen fertilizer company in the United States, saw a stronger growth in revenue in the third quarter, an increase of 129% year-on-year, and sales growth of 29% to US$489 million.
The good days for fertilizer producers now come out of years of sluggish growth. Since the late 1960s when some oil companies began to set foot in this field, the days of fertilizer producers in North America have always been awkward. The oil mogul did not consider the market demand and built fertilizer production plants at random, resulting in overcapacity in the following decades. The rising natural gas prices in recent years have further aggravated the days of fertilizer producers. Under this circumstance, the North American chemical fertilizer industry began to integrate the industry, shutting down some of the poorly-produced production plants and rationalizing the relationship between supply and demand. After this adjustment, the prices of chemical fertilizers have rebounded and the income of fertilizer producers has continued to increase. This year’s earnings are even better than in previous years.
But how long can a good day for the fertilizer industry last? The current industry views are not consistent. For the close view of the fertilizer industry, Potash Corp expressed optimism. They believe that according to the International Monetary Fund’s forecast, China’s GDP growth rate will reach 8.2% in 2006, and India’s growth rate will also be 6.3%, which means that there is still a strong demand for potash fertilizer. The global agricultural economy is still strong, and many countries in Asia and Latin America will maintain a high rate of economic growth. These countries will need more fertilizer, so it seems that the high price of potash can continue for some time.
Mosaic Co's CEO said that they are optimistic about the prospects for 2006. At present, the phosphate fertilizer market maintains a strong trend. After summer shutdown maintenance, it is expected that the company's potash fertilizer production will increase in the two months after this year. The company's focus next year is to increase revenue and reduce costs.
However, some people hold different views. Terra CEO Michael
L. Bennett said it is still difficult to predict the demand and trend of the fertilizer market next year, because after experiencing high fertilizer prices and other inputs, no one can be sure whether the farmers will adjust planting plans. What the fertilizer manufacturer must do is to continue to adjust the production plan in accordance with changes in the market, in order to set production and limit stocks.
Analysts of securities companies also believe that in the near term, due to lower agricultural product prices and increasing production inputs, the fertilizer industry in North America is difficult to predict whether it will be bright. Many farmers delayed their orders for fertilizers this fall, hoping that the price of fertilizers and energy prices will fall during the spring plowing next year.
US Department of Agriculture (USDA) statistics support this analysis. As production costs continue to increase, the USDA expects that crop acreage in the United States will decrease in 2006.
Ken Nyiri, a consultant of Sulfur Chemicals, UK, expressed different opinions on this. He believes that the total planting area of ​​the United States next year will not change much, but the area of ​​corn's seed value will be 10% lower than this year, or 8 million acres. In the process of growing corn, a large amount of nitrogen fertilizer is needed, so nitrogen fertilizer producers should make preparations for this.
The consultant further pointed out that the global fertilizer production capacity continues to expand, but the fertilizer cycle will likely change. The heat of potash fertilizer will cool down, and it will change from heat to heat next spring. Phosphate fertilizer has reached the peak of the cycle. The market does not support the increase of phosphate fertilizer prices this year; in the long run, the US nitrogen fertilizer industry is currently at the top of the industry. He believes that fertilizer prices will soon stop rising again, it may start to decline, and energy costs will also drop.
North American Fertilizer Manufacturers Can Be Prosperous in Red Fertilizer Markets This Year
Fertilizer producers in North America have enjoyed a prosperous day. Fertilizer prices continue to rise, corporate profits have steadily increased, and the economic conditions of China and India, two major demanding countries, are positive and demand for many products is booming.