Fertilizer Markets and Finance

Farmers are cautious over the ability of grain and oilseed prices to stay near record highs, and the impact of US drought on profits, prompting a continued reluctance to commit in advance to fertilizer purchases, PhosAgro said.

The phosphates and nitrogen group said that demand for nutrients had proved “strong” in the first half of the year, boosted towards the end of the period by the return of India, the top importer, to buy-ins.

However, this disguised a trend among primarily US and European growers to delaying purchased “until the actual application season started”.

Sensitive period

In part this is due to concerns over the ability of prices to maintain their rally, which has driven Chicago corn and soybean futures to record highs.

Farmers were badly caught out in 2008 by a collapse in crop values as the global recession hit, hurt in part by inventories of fertilizers they had built-up at high prices, which tumbled too.

The concerns chime with worries among Chicago investors too that futures may repeat their declines of last year, when corn prices tumbled 28% from a late-August peak as funds sold-off.

Read more at Agrimoney

Ukraine moved to quash fears of formal grain export restrictions, saying it had “no plans” for curbs, after US officials stoked concerns by warning of an “unofficial lid” on wheat shipments.

Mykola Prysyazhnyuk, the Ukraine agriculture minister said there was “no reason to talk about curbs” despite the poor condition of winter grains, which has prompted forecasts of a sharply-reduced wheat harvest this year.

“There are no plans to limit grain exports,” he said.

Ukraine wheat stocks, which entered the month at 8.9m tonnes, were being preserved by an already-slow pace of shipments, with “almost no exports so far in February”, Mr Prysyazhnyuk said.

Read more at Agrimoney

February may be the shortest month, but proved on Friday that it can be anything but sweet.

The impact of China’s weak import data on sentiment was assuaged a little, at least on agricultural commodity markets, when the US revealed that it had sold two cargoes of soybeans to the country.

Demand from the top buyer of the oilseed was still alive.

And, indeed soybeans for March managed a positive close, up 0.1% at $12.29 a bushel.

Cotton, of which China is also the main importer, did too, as talk of mills and merchants out there still willing to buy at the right price saw the benchmark March lot fall only briefly below 90 cents a pound only to recoil to finish at 90.61 cents a pound, up 0.3%.

Read more at Agrimoney

* Freezing weather kills grain crops in east, south Ukraine

* Partial lack of snow cover, icy rains hit Bulgaria crops

* Cold snap to lower Czech wheat, barley sowings

* Snow blanket protects grains in Poland, Romania, Hungary

(Adds frost impact on Czech crops)

By Tsvetelia Tsolova

SOFIA, Feb 10 (Reuters) - Freezing temperatures coupled with a lack of snow cover in some parts of eastern Europe have badly damaged winter sowings and will lower 2012 grain crops, farmers and meteorologists said.

A cold snap in early February, when temperatures plunged to minus 30 degrees Celsius, has damaged 40 percent of winter grain crops in major Black Sea producer Ukraine and is posing risks to sowings in smaller grain exporter Bulgaria as well as in the Czech Republic .

Sufficient snow cover is protecting plantings in most of Poland, the European Union’s fourth largest wheat producer, as well as the wheat and barley fields in Hungary, Romania and Serbia, but extensive cold is raising concerns, officials said.

The frost impact can be estimated at the end of March at the earliest, when the plants start to develop in warmer weather, but farmers and grain analysts say that most of the wasted crops can be replanted with spring sowings.

Grains can survive frosts as deep as minus 20 degrees centigrade if they have protective snow to insulate them.

Read more at Reuters

Russia has, again, delayed an announcement to clarify its grain exports policy, even as uncertainty over curbs appears to be stemming the tide of buying which has sparked fears of depleted supplies.

Viktor Zubkov, Russian deputy prime minister, will not after all reveal later the government’s thinking on grain exports, after a meeting scheduled for Friday was postponed.

The delay represents the second, after an initial date Mr Zubkov set for a statement, on Thursday, passed without an announcement.

The meeting had been widely expected to lift from 23m-25m tonnes a ceiling at which Moscow will impose export curbs.

“It seems recent meetings with government officials in Russia will likely yield a new target, probably in the neighbourhood of 27m tonnes, on total grain exports,” Brian Henry, at US broker Benson Quinn Commodities, said.

Too fast for comfort

The strong pace of 2011-12 exports - which were expected to end January, the season’s seventh month, at about 20m tonnes - has left them potentially on course to run into the ceiling as early as next month.

Read more at Agrimoney

Russia’s grain crop will be “at least” 90 million metric tons this year, the Agriculture Ministry said.

The figure may be reached “on condition of favorable weather and climate conditions,” the ministry said today in a statement, citing Agriculture Minister Yelena Skrynnik.

Russia’s target is to sow 50.8 million hectares (125.5 million acres) with all types of spring crops this year, including 30.3 million hectares of grains, Skrynnik said at a ministry meeting today. This will require financing of 224 billion rubles ($7.1 billion), including up to 150 billion rubles of loans, she said.

Farmers are poised to use extra fertilizer on 15 million hectares of winter crops this year, the statement showed.

To contact the reporter on this story: Marina Sysoyeva in Moscow at msysoyeva@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

TORONTO (Reuters) - Shares of Canadian fertilizer maker Potash Corp (POT.TO: Quote) (POT.N: Quote) fell roughly 2.5 percent on Wednesday after a dip in grain prices and a bearish view from a brokerage firm.

National Bank analyst Robert Winslow initiated coverage of Saskatoon, Saskatchewan-based Potash Corp with an ‘underperform’ rating on Wednesday, arguing that global potash supply is likely to increase more than demand, hitting prices.

“We envision global potash supply increasing more than demand through 2020, moderating medium-term potash prices and thus Potash Corp’s margin and earnings growth,” he wrote in a note to clients.

Potash Corp is the world’s largest producer of its namesake nutrient and it also owns interests in a number of other global potash market players. Most of its mines are in the western Canadian province of Saskatchewan and together with Mosaic Co (MOS.N: Quote) and Agrium Inc (AGU.TO: Quote), the companies account for roughly a third of potash exports.

Winslow, who has a $39.50 price target on shares of Potash Corp, also said improving global grain inventory levels are likely to keep a lid on grain prices.

Strong grain prices are a key driver of fertilizer demand and a lower prices recently prompted some dealers and farmers to hold off on fertilizer orders in the hope that prices for the macro nutrients - nitrogen, phosphate and potash - would weaken.

The stronger than normal seasonal weakening in potash demand has already prompted Potash Corp to announce shutdowns at two of its facilities in Saskatchewan. The Rocanville shutdown extends from December 25 to February 4, while the shutdown at Lanigan begins on January 8 and will extend until March 3.

Mosaic, the world’s largest producer of phosphate-based fertilizers, said last week it would cut its phosphate output, due to weakening prices.

POTASH OUTLOOK 

Potash - the common name for widely used crop nutrient potassium chloride - is only mined in a handful of countries. Canada, Belarus and Russia account for the vast majority of the world’s production and exports.

Growing food grain demand from emerging economies like China, India and Brazil has put pressure on farmers to boost grain supplies and lifted demand for potash and other macro nutrients.

This has prompted Potash Corp, Mosaic and Agrium to expand the size of their operations. Within the coming decade the three companies, which market overseas potash sales through a single joint venture, will account for more than 36 million tonnes of annual potash production capacity - equal to more than 50 percent of the world’s current production capacity.

German potash miner K+S (SDFGn.DE: Quote) and global mining giant BHP Billiton (BHP.AX: Quote) (BLT.L: Quote) are also investing billions in Saskatchewan. BHP’s proposed Jansen project is expected to become the world’s largest potash mine if the Anglo-Australian mining giant pushes ahead with it.

In 2010, BHP attempted to acquire Potash Corp for $39 billion, a hostile offer that was blocked by the Canadian government.

Potash Corp’s market value soared to roughly $55 billion early last year as grain prices and fundamentals strengthened. But its market value has dipped below $37 billion now, as grain prices have weakened from year ago highs.

New York-listed shares of Potash Corp were down 2.6 percent at $42.61 in afternoon trading on Wednesday, while its Toronto-listed shares were down 2.5 percent at C$43.17.

(Editing by Janet Guttsman)

By Euan Rocha

Ukraine should be able to offer a better price for milling wheat than Russia in North African and Middle Eastern markets after it won a tender in Egypt on Oct. 29, according to UkrAgroConsult.

Egypt, the world’s biggest wheat importer, bought 120,000 metric tons of Ukrainian wheat, half from Toepfer International at $247.92 a ton and half from Venus International at $249.30 a ton. Ukrainian wheat was $8 a ton less than the lowest Russian offer, the Kiev-based researcher said today by e-mail.

“We will be competing with Russia all the time on the Egypt market now,” Liza Malyshko, an analyst at UkrAgroConsult, said by phone today. ’’I think Ukraine will be able to sustain a lower price in this market. A lot will depend on the domestic price. Internal prices in Russia have started to increase and we see that this trend is starting here.’’

Ukrainian authorities scrapped a 9 percent export tax for wheat, which came into force on July 1, from Oct. 22. The government expects Ukraine’s grain harvest to increase by 35 percent to 53 million tons this year, helped by favorable weather. The Agriculture Ministry expects 27 million tons of grain to be shipped this year, Mykola Prysyazhnyuk, the minister, said on Oct. 19.

Buyers’ interest in Ukrainian wheat and the number of traders at tenders suggest that exporters will buy in the domestic market and that the price for milling wheat will gradually increase, according to the researcher.

Wheat prices are not seen declining in Russia nor in Ukraine until the status of the 2012 harvest is known, according to Malyshko.

To contact the reporter on this story: Kateryna Choursina in Moscow at kchoursina@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Ukraine’s winter wheat plantings declined by 2.2 percent to 6.32 million hectares (15.6 million acres) as of today, the country’s Agriculture Ministry said.

That compared with 6.46 million hectares a year earlier, the ministry said by e-mail. The plantings fell short of a government forecast of 6.56 million hectares, according to the statement.

Total winter grains planting declined to 7.78 million hectares compared with 7.87 million hectares.

Winter barley planting rose to 1.13 million hectares from 1.08 million hectares a year earlier, the ministry said.

To contact the reporter on this story: Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Russia is poised to again become the world’s second-biggest wheat exporter as the nation’s biggest grain-port overhaul raises shipping capacity by as much as 67 percent in four years.

Government and private operators are spending $574 million to develop and add terminals on the Baltic, Azov and Black Seas and the nation’s rivers to end bottlenecks that keep trains waiting for weeks to unload. Supply is surging following an almost yearlong ban imposed by Prime Minister Vladimir Putin to conserve grain after the worst drought in half a century.

Russia’s emergence as a leading supplier may reduce global grain prices, said Peter Biermann, a trader at Aston FFI in Lausanne, Switzerland. “Russia could easily become the No. 1 exporter of wheat in the world” on the expansion plans, Biermann said. Aston is a trading unit of Russian grain and oilseed producer OAO Aston.

Russia is seeking to again become a leading wheat supplier about three decades after the cost of imports helped push the Soviet Union to the brink of bankruptcy in the 1980s. Exports began climbing in 2001, and in 2002 Russia was among the top three wheat-exporting countries, according to U.S. Department of Agriculture data.

It may export more than 12 percent of global wheat this season, the International Grains Council says, making it the world’s fourth-biggest supplier. The ban was lifted on July 1.

Hidden Costs

The new investment may increase grain loading capacity to almost 42 million metric tons in 2014 from 25 million tons this year, according to Bloomberg calculations based on investors’ plans.

More terminals will reduce the hidden costs of grain shipments by at least $15 a ton because exporters won’t have to pay for the idle hours that rail cars and ships spend in bottlenecks or for fines for delayed cargoes, said Igor Pavensky, head of Rusagrotrans’s market analysis department. Rusagrotrans is the country’s bigger carrier of grain by rail.

Russia may be able to widen the discount at which it sells grain in international tenders by $7 to $8 a ton by 2015, Pavensky said. Russian wheat now sells at a discount of about $10 a ton compared with French milling wheat from Rouen, he said.

Government and private operators plan to invest at least 18.2 billion rubles ($574 million) to add 18.9 million metric tons of capacity at grain terminals in the five years through 2014, according to Bloomberg calculations based on company plans. That includes additions last year during the export ban.

Asia, Cuba

Lower logistics fees will allow traders to open up new markets, Rusagrotrans’s Pavensky said. Russia may supply up to 4 million tons of grain to the Asia-Pacific region and up to 2 million tons to South America and Cuba by 2020, he said.

Dry weather is hurting crops from the U.S. to Ukraine. Mexico’s Grupo Bimbo SAB, the world’s largest bread maker, and CSM NV of the Netherlands, the biggest manufacturer of bakery ingredients, are among companies that have increased prices to pass on higher costs.

The Russian ban sent wheat futures to a 29-month high on Feb. 14, with prices jumping as much as 91 percent from the end of June 2010 to that peak. Since then, prospects for rising global output in countries including Russia, and the slowing economy, have cooled the increase. Prices, at $6.58 a bushel today on the Chicago Board of Trade, are down 28 percent from their high.

Weather and Politics

“Cheaper input costs will allow Russia to export at more competitive prices to the Mediterranean and beyond,” said Swithun Still, a trader at Switzerland’s Alegrow SA. “However, as last year showed, we are at the mercy of the weather and politics, two things we cannot predict very well or control.”

Putin imposed the grain export ban to shore up domestic supply after the drought caused Russia’s grain crop to plummet 37 percent to 60.9 million tons last year, from 97 million tons a year earlier.

Handling prices have been rising because of capacity limitations, spurring state and private investors to build terminals, Alexander Korbut, vice president of Russia’s Grain Union, said by phone on Sept. 22. At one terminal in the port city of Novorossiysk on the Black Sea, fees jumped about 40 percent to $28 a ton from a year ago and at another by about 35 percent to $23, he said.

Grain handling is “extremely profitable in Russia,” Korbut said. “When small ports appeared on the Azov Sea in 2006 to 2008, investors made a return in just one season.”

Rail Cars

Plans to boost exports may stumble on a lack of railway infrastructure and rail cars; rising transportation costs; and market demand, according to the Institute for Agricultural Market Studies, known as Ikar.

About half of the projects are located in the city of Novorossiysk, where OAO Russian Railway banned rail shipments on Aug. 27 because of congestion. The restriction to one terminal was lifted after 10 days and to the other after almost three weeks.

Most of the new projected capacity, or about 13 million tons, may be devoted to wheat exports, according to Ikar. This amounts to 10 percent of the world’s wheat imports, a quantity Russia will find hard to grab from existing suppliers, Ikar director Dmitry Rylko said by phone on Sept. 26.

Ukraine, Russia’s neighbor and the world’s third-biggest barley exporter last season, may compete with Russian projects as it has about 6 million tons of surplus export capacity already, according to Rylko.

Ukraine, Kazakhstan

While Ukraine increases capacity, now at about 30 million tons, Kazakhstan also has ambitious plans to expand its wheat- export potential and the U.S. may also increase grain shipments in five years, he said.

“Still, we need the terminals,” Rylko said. “They’re being built with room to grow and so we can at least maintain exports.”

Private building efforts are already underway. Delo Group, beneficially owned by Sergei Shishkarev, head of the transport committee in Russia’s lower house of parliament, opened a terminal in Novorossiysk this year, according to the group’s press service. Vladimir Lisin, the billionaire owner of OAO Novolipetsk Steel, built a terminal in Tuapse last year, according to his UCL Holding company.

In addition to Novorossiysk and Tuapse, investment is also flowing into construction of terminals and expansion of existing capacity in Kaliningrad on the Baltic Sea, in Taman on the Black Sea, on Azov Sea ports and on the Volga and Don rivers.

A government plan to construct another deep-water grain terminal at the port of Taman, on a peninsula between the Black and Azov Seas, may further expand capacity at least 6 million tons by 2017, state-controlled United Grain Co. said last week. The terminal may cost 10 billion rubles, according to a company presentation last year.

“A fight for clients who supply grain will emerge,” Korbut said. “This will increase the profitability of growing grain.”

To contact the reporters on this story: Marina Sysoyeva in Moscow msysoyeva@bloomberg.net Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net;

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Ukraine’s exports of wheat, corn and barley increased 20 percent in the first half of September compared with a month earlier, ProAgro said, citing preliminary information from ports.

Shipments of the three cereals advanced to about 602,600 metric tons in the month’s first 15 days compared with 502,100 tons, the Kiev-based researcher, said today in e-mailed statement.

Wheat exports rose to 407,800 tons from 163,500 tons a month earlier and the crop was sent to Spain, Italy, Egypt, the Netherlands and Portugal, the researcher said. Corn shipments rose from zero to 5,480 tons. Barley exports declined in the period to 189,300 tons from 338,600 tons last month, according to ProAgro.

Another 281,800 tons of grain, including 171,400 tons of wheat and 77,400 tons of barley, will be shipped from Ukrainian ports soon, ProAgro said.

Rapeseed shipments reached 68,700 tons in the period, an advance of about 14 percent, ProAgro said.

Sunflower oil exports declined to 19,000 tons from 70,400 tons.

Ukraine exported about 1.8 million metric tons of grain last month, said Sergey Stoianov, director of the Kiev-based Ukrainian Agrarian Confederation producers’ group, without providing a prior comparison.

Shipments included 700,000 of wheat and about 1 million tons of barley, Stoianov said in e-mailed statement today.

— Corn futures are called to open 1 cent to 3 cents a bushel higher on the Chicago Board of Trade on speculation that hail and wind storms in Kansas, Nebraska and Iowa overnight and dry weather in parts of the eastern Midwest will erode prospects for crops, Brian Grete, a senior market analyst at the Professional Farmers of American newsletter in Cedar Falls, Iowa, said in a telephone interview.

— Soybean futures may open 2 cents to 4 cents a bushel higher in Chicago on concern that dry Midwest weather will reduce yields, Grete said. Soybean-oil futures are expected to open steady to up 0.1 cent a pound, and soybean-meal futures may open steady to $1 higher for 2,000 pounds. The dollar’s drop may boost investor demand for commodities as a hedge against inflation, he said.

— Wheat futures may open 1 cent to 3 cents a bushel higher on the CBOT, the Kansas City Board of Trade and the Minneapolis Grain Exchange on a forecast that Australia’s output will shrink, Grete said. Drought threatens to delay or prevent planting in the U.S. Great Plains in the next two months, he said.

— Corn futures are called to open 1 cent to 3 cents a bushel higher on the Chicago Board of Trade on speculation that the hottest July weather since 1955 in parts of the U.S. Midwest damaged yields more than the government estimated last week, Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana, said in a telephone interview.

— Soybean futures may open 4 cents to 6 cents a bushel higher in Chicago on speculation that rain this week will miss fields in parts of the central and northwestern Midwest, increasing stress on plants, Gerlach said. Soybean-oil futures are expected to open up 0.15 cent to 0.25 cent a pound, and soybean-meal futures may open 50 cents to $1.50 higher per 2,000 pounds.

— Wheat futures may open 4 cents to 6 cents a bushel higher on the CBOT, the Kansas City Board of Trade and the Minneapolis Grain Exchange on speculation that wet weather during the U.S. planting season and unusually high temperatures in July will curb output in the northern Great Plains, Gerlach said.

— U.S. stocks climbed as commodities rose and Target Corp. and Staples Inc. earnings beat estimates. The franc gained after the Swiss National Bank refrained from pegging the currency to the euro or adopting a target. {NSN LQ2R456VDKHW <GO>}

— Wholesale costs in the U.S. rose more than forecast in July, led by higher prices for tobacco, trucks and pharmaceuticals, showing declines in commodity expenses have yet to filter to other goods. {NSN LQ2OLX0D9L35 <GO>}

— The latest Franco-German strategy to counter the euro debt crisis stressed ideas already in the works, shunning bolder steps that investors were seeking to calm markets. {NSN LQ2K5O07SXKX <GO>}

— The European Commission said it will draw up proposals for a financial transactions tax in the 27-nation European Union before a summit of world leaders in November, backing calls by French President Nicolas Sarkozy and German Chancellor Angela Merkel for the levy. {NSN LQ2MXM07SXKX <GO>}

— The franc strengthened after the Swiss central bank stopped short of announcing a target rate or temporary peg to the euro in its third attempt in as many weeks to drive down the currency. {NSN LQ2EYM1A1I4H <GO>}

— Companies are paying the most to borrow relative to benchmark government debt since September 2009 as investors shun all but the safest securities on concern that the biggest economies are faltering. {NSN LQ2FI20D9L35 <GO>}

— Commodity markets are being driven by the “severe tension” between investors’ expectations for supply shortages and economic-growth concerns, Barclays Capital said. {NSN LQ29DV1A74E9 <GO>}

— Commodities that were sold off by speculators on futures exchanges are still finding buyers who need raw materials to make phones, cars and washing machines. {NSN LQ2KV01A1I4H <GO>}

— Deere & Co., the world’s largest farm-equipment maker, posted third-quarter profit that topped analysts’ estimates and raised its full-year earnings forecast as global demand improved. {NSN LQ2KKW6VDKHU <GO>}

— Crude oil climbed to the highest in almost two weeks as a report showed U.S. gasoline inventories fell as consumption of the motor fuel increased. {NSN LQ2QFL6VDKHV <GO>}

— Prices in the $150 billion fertilizer market are lagging behind gains in food costs, providing farmers another incentive to boost production as grains and oilseeds advance. {NSN LQ2HKG0UQVI9 <GO>}

— India may consider allowing additional rice exports, Food Minister K.V. Thomas said. {NSN LQ27I86JTSE8 <GO>}

— India aims to pour $60 billion into ports by 2020 under a drive to spur the fastest growth in more than two decades and ease bottlenecks stoking the highest inflation among major economies. {NSN LQ1AGJ6K50YZ <GO>}

— Drought conditions in parts of China will have a limited impact on the autumn grain harvest, the Ministry of Agriculture said. {NSN LQ1XTZ6TTDS1 <GO>}

— Yingluck Shinawatra became Thailand’s first female prime minister by pledging to lift rural incomes through higher rice prices. The rest of Asia may now have to pay for her campaign promise. {NSN LQ2D4J6TTDSB <GO>}

— Palm-oil futures in Kuala Lumpur climbed on speculation that a drop in output this month in Malaysia and Indonesia may lower stockpiles amid a surge in exports. {NSN LQ2JCJ6JTSE8 <GO>}

— U.S. feedlots probably increased cattle purchases in July by the most this year as a record drought in the southern Great Plains dried up pastures, forcing farmers to sell livestock sooner than normal, analysts said. {NSN LQ1JZ06VDKHT <GO>}

— Syria is seeking to buy 100,000 metric tons of soft wheat from all origins. {NSN LQ2P3C6JIJUO <GO>}

— A second year of drought in Russia’s Siberian Altai region may reduce the local grain crop by 13 percent to 3.5 million tons this year. {NSN LQ2KDA07SXKX <GO>}

— SABMiller Plc will take its A$9.5 billion ($10 billion) bid for Foster’s Group Ltd. directly to shareholders, going hostile after the board rejected the price as too low. {NSN LQ2L770UQVI9 <GO>}

What follows are opening calls for U.S. grain and oilseed markets.

— Corn futures are called to open 5 cents to 8 cents a bushel lower on the Chicago Board of Trade on speculation that unexpected rain in parts of the Midwest overnight will boost output, while signs of slowing global economic growth reduce demand, Chad Henderson, a market analyst at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin, said in a telephone interview.

— Soybean futures may open 6 cents to 10 cents a bushel lower in Chicago on speculation that rain will boost U.S. yields just as plants need moisture to fill pods with beans, Henderson said. Soybean-oil futures are expected to open down 0.3 cent to 0.4 cent a pound, and soybean-meal futures may open $1.50 to $2.50 lower for 2,000 pounds.

— Wheat futures may open 6 cents to 9 cents a bushel lower on the CBOT, the Kansas City Board of Trade and the Minneapolis Grain Exchange on speculation that global demand may slow for food and animal feed made from the grain, Henderson said. Rain may aid crops in Canada, Australia and Russia.