Fertilizer Markets and Finance

#Morocco joined the list of countries on grains investors’ at-risk list as concerns for Ukraine shifted up a gear, with an estimate that more than half winter sowings could be lost.

Winter-planted grains in Morocco - whose king, Mohammed VI, entitled the Commander of the Faithful, has urged citizens to pray for rain – are under threat from both low rainfall and cold.

While the North African country received “long-awaited” rain two weeks ago, this may have been “insufficient and a bit too late to offset the impact of the drought situation for this year’s crop”, leaving some areas looking at a 50% drop in yields, a report from the US embassy in Rabat said.

Furthermore, “unusually low temperatures have impacted sprouting and hampered plant development in several grain production areas”.

Indeed, the setbacks, which have prompted a surge in applications for a new

government-backed crop insurance scheme, “may have caused more damage to the grain crop than what has been officially indicated by the Ministry of Agriculture”, the report said, quoting information from “agricultural contacts”.

Barley more expensive than durum

The comments contrast with those the embassy made a month ago, when it said that “agricultural experts remain hopeful for a good grain harvest”.

While Morocco is not a major grains producer, the fate of its harvest stands to impact trade, with the country ranking as a significant buyer of barley and,

especially, wheat, notably from France.

Morocco’s wheat imports in 2010-11 topped 3.9m tonnes, placing the country with the likes of Bangladesh and Nigeria among mid-ranking buyers, behind the top-flight purchasers such as Egypt and Indonesia.

And, in a twist caused by Morocco’s poor weather, in stunting pasture growth and threatening barley crops it has driven prices of feed barley prices ahead of those of durum, a food wheat used in making pasta.

In France’s cash market, durum was worth E280 a tonne on Wednesday – a 37%

premium to feed barley, according to Paris-based consultancy Agritel.

Read more at Agrimoney

(Reuters) - China said on Wednesday it would boost agriculture innovation in an effort to increase food output, signaling that the world’s most populous country is trying to tackle outdated farm and food infrastructure to feed its people.

China accounts for a fifth of the world’s population with less than 9 percent of its arable land, and the cabinet suggested in a document that China’s leaders were aiming to get serious about technology to ensure long-term food supplies.

The State Council, or cabinet, said in the first policy document of the year it would increase investment and subsidies for the agricultural technology sector this year to stabilize grain production, state media reported.

Technological innovation in the sector would “improve land yield, resource efficiency and labor productivity,” the official Xinhua news agency said.

The No. 1 Document, as it is called, has for the past nine years focused on rural issues, including agriculture, water conservation, farmers’ income, and land transfer issues.

The State Council said in this year’s paper the government would encourage research focusing on areas including bio-technology, seed production and effective use of farmland, Xinhua reported.

It also said the government would seek to push banks to increase lending to rural areas and keep prices of agricultural commodities at “a reasonable level.”

China has been battling persistent consumer inflation, which was largely driven by food prices, and hit a peak in July of 6.5 percent.

Agriculture experts had expected the State Council to set guidelines on seed cultivation and on implementing a program of promoting the application of genetically modified technology that was introduced in 2008.

The central government estimates that China’s national grain consumption will reach 572.5 million tonnes by 2020. Although China is largely self sufficient in wheat, it is not in soybeans and corn.

In 2010, China returned to importing corn in earnest after years of blocking foreign grain, buying a record 1.57 million tonnes, up 18 times from the previous year because domestic production couldn’t keep up with demand.

Some analysts say China’s agricultural production growth lags behind the country’s overall economic growth.

The country is expected to triple corn purchases this year, and rice imports are also expected to rise.

(Reporting by Michael Martina and Tracy Zheng; Editing by Robert Birsel)

India’s nitrogen groups are to end a decade-long purdah on new plants which has turned the country into a huge importer, responsible for nearly one-fifth of world purchases of the nutrient.

India’s government will this year announce a series of measures “which will help kick-start new investments in urea”, Salil Garg, a director at Fitch Ratings, said.

The initiatives could see a sector which has undertaken “no major capex” since 2002 add 10.1m tonnes of urea capacity by 2017, through a mixture of refurbishing closed plants, expanding existing ones and construction of facilities on greenfield sites.

Such a programme, at a cost of 400bn rupees ($8.1bn)  at current price, would lift output to 33.7m tonnes, enough to return the country to self-sufficiency in urea, the ratings agency said.

India’s imports have ramped up since 2004, when the lack of investment at a time of rising agricultural production began to tell, lifting annual imports to well over 6m tonnes by 2007, around which level they have remained.

Read more at Agrimoney

The current talk in the potash industry is very conflicting. People predict prices and demand to rise and fall and production to do the same. They predict companies to be taken over, and, or protected by governments. It would seem that with the world economy having an uncertain future, posturing is what we are going to get right now from the major players. But with food supplies and prices depending on the fertilizer, stockpiles and government intervention are also very likely for the near future.

BHP, the anglo-australian miner tried and failed to take over PotashCorp, the world’s largest potash miner because the Canadian government intervened. This was not the first company their current CEO Marius Kloppers has tried and failed to court, they also made a play for Brazilian mining giant Rio-Tinto. It costs money to try and fail, especially repeatedly.  And yet, BHP still thinks that PotashCorp will be theirs. The Australian Financial Review, has said, “Inside BHP, the view is that, within a decade, pure-play fertilizer producers such as PotashCorp and The Mosaic Company will be owned by diversified miners that will have far greater financial firepower to withstand a downturn in prices,” The Canadian mining industry has seen many takeovers in the past few years, with companies trying to reduce the commitments they made to maintain Canadian operations due to the economic downturn. This makes it likely that the government would continue to protect such a strategic resource. Potash is irreplaceable, finite, not widely distributed and sales of all other fertilizers are flat or in decline. As world demand for meat rises, the need to fertilize grain to farm the meat is only going to rise, but perhaps not forever.

However, PotashCorp has temporarily shuttered 3 mines to keep prices high. BHP is buying land nearby to build new mines in Saskatchewan and India is talking about not buying Potash till June, or not at all this year. P.S. Gahlaut, managing director of Indian Potash Ltd, said that farmers could not use potash for a year without affecting yields, and, “We don’t need any imports in the first half as we will have sufficient opening stocks. With the government unlikely to increase the subsidy, the use of potash may not see any growth.” It is possible that India has enough stockpiles to put off potash purchases till June but it is unlikely that they will forgo its use entirely this year. The rising middle class in India wants more meat and not using potash would not allow for that. If they think they can maintain yields without potash, they would be the only ones who think so.  It is even unlikely that they think that, but rather is simply an attempt to depress the price by indicating that demand will be that much lower. Whatever happens with potash stocks this year will depend largely on market movements in the price of food and oil.  Volatility is likely and one would be wise to watch the stocks closely.

Food-price inflation concerns for policy makers are set to persist even as rice declines and wheat trades below this year’s peak, according to the United Nations, which said that importers are still paying more than a year ago.

Another year of bumper wheat and rice harvests, as well as a continued surplus in corn, is needed to bring stockpiles back to “healthy” levels and reduce inflation concerns, Abdolreza Abbassian, senior economist at the UN Food & Agriculture Organization, said in an interview in Singapore today.

Costlier food may worsen the lives of the 1.1 billion the World Bank says live on less than $1 a day, adding to pressure on central banks to raise interest rates even amid increased concerns that the global economy may slip back into recession. Global food prices reached a record in February.

“Food security is the number-one priority of governments, followed by food inflation,” Amit Gulrajani, general manager for rice trading and shipping at Olam International Ltd. (OLAM), said at a conference in Singapore today. Olam, based in the city- state, is one of the world’s three biggest rice shippers.

The World Food Price Index, a 55-item gauge compiled by the Rome-based FAO, rallied 26 percent in the year to August. Wheat in Chicago, which peaked at $9.1675 per bushel on Feb. 14, has shed 14 percent this year and traded at $6.80 at 1:10 p.m. Rice, trading at $16.86 per 100 pounds, has lost 9.1 percent since reaching the highest level since 2008 earlier this month.

No Relief

While the World Food Price Index may decline for a third month in September, the gauge will remain above last year’s level and provide no relief for food-deficit countries that rely on imports for supplies, Abbassian said.

French President Nicolas Sarkozy warned in June that the world must take action to avoid another food crisis, saying policy makers risked making this a “century of hunger” unless there were new rules on global supplies.

Food prices will remain higher in the next decade than the past 10 years as farm production slows and demand increases, the OECD and the FAO said in a joint report in June. Global output is forecast to grow an average 1.7 percent a year through 2020, compared with 2.6 percent in the previous decade, they said in their annual Agricultural Outlook report.

Food inflation “has replaced gasoline price as the most important household expense concern,” William Simon, chief executive officer of Wal-Mart Stores Inc., the world’s largest retailer, said in an earnings conference call on Aug. 16.

Worldwide Reserves

Global inventories of cereals including rice, wheat and corn will meet about 20.8 percent of demand, or 76 days, in the 2011-2012 season, the smallest level of coverage since the 2007- 2008 season, the FAO said in a Sept. 8 report.

Tightening corn supply, which the FAO described as a “cause for concern,” was already reflected in high prices, the agency said on Sept. 8. Corn futures in Chicago traded at $6.9725 per bushel today, 37 percent higher than a year ago.

Rice prices in Chicago gained in July and August after a new Thai government said that it planned to pay above-market rates for supplies from farmers to boost rural incomes. Thailand is the world’s largest exporter of the grain.

The rice-buying policy may “create problems” for the government as it will inflate the nation’s stockpiles and the state may be unable to sell them on the open market without incurring losses, Abbassian said at the Singapore conference.