11th Sept 2012, by Agrimoney
The US drought will whet demand for potash by encouraging higher sowings of fertilizer-hungry corn, Uralkali said, unveiling profit-beating results, supported by rising prices of the nutrient.
The potash group, the second-largest producer by capacity after Canada's PotashCorp, acknowledged a near-term dent to US demand for the nutrient from the worst drought since 1956, as poor crops cut farmers' willingness, and need, to apply fertilizers.
"Following the severe drought conditions, demand in the major [US] agricultural areas shrank in the short-term due to lower yields and, consequently, lower volumes of potash removed from soils with the harvest,"Uralkali, which is based in Russia, said.
'Strong profitability expectations'
However, the group stuck by a forecast of world potash use reaching 54m-56m tonnes in 2012, as the high crop prices prompted by poor US crops encourage farmers worldwide to raise output.
In Brazil, demand was, after a winter lull, "to pick up again starting from October 2012 in view of the upcoming safrinha corn season and strong profitability expectations by farmers", Uralkali said.
In Europe, "we believe increased wheat prices will accelerate potash consumption during the fall season".
And US demand would revive in 2013, as growers, for many of whom high crop prices and insurance payments will compensate for poor yields this year, attempt to cash in too.
"We expect strong farmer cash flows this year supported by high agricultural commodity prices to incentivise a large planting in 2013 which should drive greater potash demand," the company said.
Drought impact
The comments come amid contrasting indications over the impact of the drought on farm profits, with the machinery sector appearing to take a hit from reduced US farm spending.
Titan Machinery on Monday followed Deere & Co, the world's largest agricultural machinery group in cutting its profits forecast.
However, estimates, by forecasters including the US Department of Agriculture, that American farmers will achieve strong earnings this year anyway have eased longer-term concerns,
Profits rise
Uralkali unveiled earnings up 6.0% at $842m in the January-to-June half, ahead of the $827m that investors had expected, according to a Reuters poll.
Revenues rose 13.2% to $2.23bn, also ahead of market forecasts of a $2.08bn result.
While shipments fell 7.7% by volume, the group's export prices achieved rose 17% to $380 a tonne. Domestic prices soared 42% to $270 per tonne.
Uralkali depositary receipts, a proxy for shares, fell 0.7% to $40.45 in afternoon deals in London.
The US drought will whet demand for potash by encouraging higher sowings of fertilizer-hungry corn, Uralkali said, unveiling profit-beating results, supported by rising prices of the nutrient.
The potash group, the second-largest producer by capacity after Canada's PotashCorp, acknowledged a near-term dent to US demand for the nutrient from the worst drought since 1956, as poor crops cut farmers' willingness, and need, to apply fertilizers.
"Following the severe drought conditions, demand in the major [US] agricultural areas shrank in the short-term due to lower yields and, consequently, lower volumes of potash removed from soils with the harvest,"Uralkali, which is based in Russia, said.
'Strong profitability expectations'
However, the group stuck by a forecast of world potash use reaching 54m-56m tonnes in 2012, as the high crop prices prompted by poor US crops encourage farmers worldwide to raise output.
In Brazil, demand was, after a winter lull, "to pick up again starting from October 2012 in view of the upcoming safrinha corn season and strong profitability expectations by farmers", Uralkali said.
In Europe, "we believe increased wheat prices will accelerate potash consumption during the fall season".
And US demand would revive in 2013, as growers, for many of whom high crop prices and insurance payments will compensate for poor yields this year, attempt to cash in too.
"We expect strong farmer cash flows this year supported by high agricultural commodity prices to incentivise a large planting in 2013 which should drive greater potash demand," the company said.
Drought impact
The comments come amid contrasting indications over the impact of the drought on farm profits, with the machinery sector appearing to take a hit from reduced US farm spending.
Titan Machinery on Monday followed Deere & Co, the world's largest agricultural machinery group in cutting its profits forecast.
However, estimates, by forecasters including the US Department of Agriculture, that American farmers will achieve strong earnings this year anyway have eased longer-term concerns,
Profits rise
Uralkali unveiled earnings up 6.0% at $842m in the January-to-June half, ahead of the $827m that investors had expected, according to a Reuters poll.
Revenues rose 13.2% to $2.23bn, also ahead of market forecasts of a $2.08bn result.
While shipments fell 7.7% by volume, the group's export prices achieved rose 17% to $380 a tonne. Domestic prices soared 42% to $270 per tonne.
Uralkali depositary receipts, a proxy for shares, fell 0.7% to $40.45 in afternoon deals in London.
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