(Bloomberg) -- A slump in nitrogen prices could be a sign U.S. farmers planted less corn.
Spot prices of ammonia and urea in the U.S. Gulf region are trading near the lowest in more than two years amid a global glut as the coronavirus pandemic withered industrial demand for the chemicals and Chinese producers ramped up production. Higher inventories at the end of planting season also may suggest that American farmers sowed fewer than the 97 million acres the U.S. Department of Agriculture forecast in March, said Bloomberg Intelligence analyst Daniel Cole.
Nutrien Ltd., the world’s largest crop-nutrient supplier, said in May it expects U.S. corn acres in the range of 94 million to 96 million while CF Industries Holdings Inc. is forecasting 92 million to 94 million acres.
“That seems to be the consensus: a big crop, but not as big as USDA projected,” Cole said by phone. “I think that’s a factor.”
Corn is a “very hungry crop” when it comes to nitrogen and requires about 180 pounds (82 kilograms) of the fertilizer per acre, compared with about 100 pounds for other crops, said Jonas Oxgaard, an analyst at Sanford C. Bernstein.
To be sure, a shift away from corn may only explain part of the drop in nitrogen prices. Even if U.S. farmers planted 5 million acres less than initially projected, it would translate to a loss of only about 1.5% of total U.S. demand for nitrogen if farmers switched to crops such as soybeans that don’t require the fertilizer, he said.
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