What We're Watching This Week - Nov. 21, 2016

Farmers Look for Post-Harvest Fertilizer Price Discounts

FARMING

‘Tis the season for post-harvest budgeting and tax planning for US farmers. As corn growers look for price discounts on nitrogen fertilizers this fall, the near-term price outlook is increasingly diverging for anhydrous ammonia and urea fertilizers. On the one hand, farmfutures.com sees US retail prices of anhydrous ammonia fertilizers declining further in the post-harvest season, as its estimation of retail fair value is still $30 to $70 per tonne below recent retail price quotes. On the other hand, US Midwest wholesale prices have rebounded by roughly $25 per tonne since hitting a multi-year low in July 2016. The key reason is that Indian buyers are reportedly looking for volume bargains and Chinese producers have furloughed coal-fired plants, with domestic bituminous coal prices up over 50 percent in 2016. Still, the spectre of new nitrogen fertilizer capacity coming online in the US during the coming months could give pause to any longer-term rally in urea prices. As farmers weigh post-harvest buying decisions, we will be monitoring the monthly U.S. nitrogen price index as well as urea imports from China to the United States using Gro, Gro-Intelligence’s data platform.

US market price index of nitrogen fertilizers is scaled to 2011 dollars.

Indian Wheat Growers Struggle After Black Money Crackdown

POLICY

The Indian government’s attempt to curtail shadow economic activities by abolishing the 500 and 1,000 rupee bank notes last week is having unintended consequences for India’s farmers. Given that most of the country’s rural farmers operate in a cash-oriented manner, as the local bank branch can be miles away, they are likely to feel the brunt of the government’s move. Although the business environment will eventually re-calibrate to the “new” normal, we will be watching to see how last week’s whiplash will impact the final amount of wheat planted, as many wheat growers have only one to two weeks to finalize their plantings.

India's wheat imports, exports, and area harvested.

USDA Flags Potential Downgrade to Argentina’s Soybean Crop

COMMODITIES

Argentina’s Ministry of Agriculture (MinAgri) is scheduled to update its forecast of the country’s soybean and corn crops on Thursday. Growers in the country have faced multiple hurdles this planting season, including widespread flooding and hailstorms in the Santa Fe province. The weather setbacks has encouraged the USDA attaché in Buenos Aires to cut its forecast for the country’s soybean harvest this upcoming season to 55 million tonnes, or 2 million tonnes below the USDA’s official forecast. Since weather setbacks will likely impact final planted acreage and initial emergence, we will be watching to see how Argentina’s MinAgri sets expectations relative to the current balance sheet.

Argentina's soybean balance sheet, 2000 - 2016.