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evidence credit crunch will reduce fert demand

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    Posted by Truth About Trade & Technology

    Friday, 17 October 2008

    Red River Farm Network
    Original Publish Date: October 13, 2008

    Recent rains have improved seeding conditions, allowing farmers to begin planting soybeans in parts of Mato Grosso, Brazil. Farmers now face another problem, the lack of fertilizer. Even farmers with access to credit have not received their fertilizer due to a distribution delay. A Cuiaba newspaper reports that one producer who normally plants about 15,000 acres of soybeans will plant 10,000 this year because he did not receive enough fertilizer.


    Friday Oct 10, 2008

    Analysts Reduce Brazil's Soy Outlook

    A number of private analysts have trimmed their outlook for Brazil's 2008-09 soybean crop due to the ongoing credit crunch caused by global market turmoil.

    This week local analysts AgraFNP reduced their forecast to 61 million tons, from a previous 62 million tons, due to tight credit and high fertilizer costs. Brazil produced 60 million tons during the 2007-08 season.

    According to local farmers, the main problem is lack of financing from trading companies and input suppliers, who have seen their cash availability seriously diminished by the current global financial crisis.

    Meanwhile local consultancy firm Celeres last week lowered its forecast for the Brazilian soybean crop to 61.7 million tons from a previous 63.8 million tons, citing the lack of credit and uncertainty over prices.

    Local consultancy AgRural has also said it will revise its crop estimate shortly to around 61 million tons, down from a current estimate of 62 million tons, due to recent negative events.

    Posted at 01:11PM CDT Oct 10, 2008 by Kieran Gartlan


    USDA Sec. Ed Schafer last week said he is concerned the credit crunch could "have an effect on ag production." How? Well... if growers can't get the operating loans for 2009 production, they'll obviously have to cut back on some inputs... and EVERYBODY seems to be thinking growers will cut back on fertilizer use in 2009. Just look at the stock values of companies like Mosaic Companies, Potash Corp Saskatchewan and Terra Nitrogen Companies. While nearly all stocks plunged last week (and today), the stock prices on fertilizer companies really dove last week as nearly every "street analyst" is looking for lower U.S. fertilizer demand for 2009.

    Pro Farmer crop consultant Dr. Cordonnier tells us Brazilian fertilizer use is down for the 2008-09 crop -- some growers are reportedly cutting fertilizer rates by as much as 25% to 30% from normal levels. If that ground built up some fertility reserves over the years (not likely), Brazilian farmers that have grown beans, on beans, on beans, on beans, etc... might not see much of a hit on this crop, but they could on next year's crop. And, it's not likely that ground built up much "reserve fertility," so they will probably see the yield hit this year if the reduced fertilizer use is an industry-wide happening.


    Farm-Credit Squeeze May Cut Crops, Spur Food Crisis (Update1)

    By Carlos Caminada, Shruti Singh and Jeff Wilson


    More Photos/Details

    Oct. 27 (Bloomberg) -- The credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries.

    Global production of wheat , the most-consumed food crop, may drop 4.4 percent next year, said Dan Basse , president of AgResource Co. in Chicago, who has advised farmers, food companies and investors for 29 years. Harvests of corn and soybeans also are likely to fall, Basse said.

    Smaller crops risk reviving prices of farm commodities that sank from records in 2008 after a six-year rally that spurred inflation and sparked riots from Asia to the Caribbean. Futures contracts on the Chicago Board of Trade show wheat will jump 16 percent by the end of 2009, corn will rise 15 percent and soybeans will gain 3 percent.

    ``The credit situation is worrying even the biggest and best farmers,'' said Brian Willot , 36, a former University of Missouri commodity analyst who now grows soybeans on 2,000 acres in Brazil. ``For the financially weak, credit has dried up completely. For the strong, credit has been delayed and interest rates are higher.''

    The number of hungry around the world is at risk of increasing as the financial crisis cuts investment in agriculture and crops, said Abdolreza Abbassian , secretary of the Intergovernmental Group on Grains at the United Nations Food and Agriculture Organization in Rome. The total increased by 75 million last year to 923 million, the UN estimates.

    Brazil Squeeze

    ``The net effect of the financial crisis may end up being lower planting, lower production,'' Abbassian said. ``More people will go hungry .''

    In Brazil , the world's third-biggest exporter of corn after the U.S. and Argentina, production may fall more than 20 percent because farmers can't get loans to buy fertilizer, said Enori Barbieri , a National Corn Producers Association vice president. The nation's coffee harvest , the world's largest, may drop 25 percent for the same reason, said Lucio Araujo , commercial director at farmer cooperative Cooxupe, located in Guaxupe.

    Borrowing costs increased and farmers struggled to get loans after the worst financial crisis since the Great Depression made banks and grain processors, including Cargill Inc. and Archer Daniels Midland Co. , less tolerant of risk.

    Minnetonka, Minnesota-based Cargill and Decatur, Illinois- based Archer Daniels, the world's largest grain processors, are among the crop buyers to halt financing for growers in Brazil, said Eduardo Dahe , who represents the companies as president of the National Association of Fertilizer Distributors.

    Lending `Stopped'

    Processors usually cover half the financing needs of farmers by accepting part of the future crop as payment. ``No one is doing it,'' Dahe said. ``It's stopped.''

    In Russia, loan rates for farmers have jumped by half in some cases to more than 20 percent in the past few months, Arkady Zlochevsky , president of the Russian Grain Union, said in an interview earlier this month.

    While the credit squeeze gripping emerging markets has yet to hurt the U.S., the risk remains, Agriculture Secretary Ed Schafer said Oct. 1.

    ``We certainly could see tight credit having an effect on agricultural production,'' Schafer said in Washington. ``The costs of farming operations today are huge, and that backs up to the banks that have balance sheets that are tight, it backs up to elevators that have credit stretched out.''

    Farm Incomes

    Warning signs are appearing.

    `Deteriorating' Conditions

    Global inventories of corn, wheat and soybeans before the harvest in the Northern Hemisphere next year will be the second- lowest since 1974, enough for 67 days of consumption, compared with 144 days of supplies in 1986, U.S. data show.

    ``Stockpiles are going to be extremely tight,'' said AgResource's Basse. ``The world cannot afford any dislocation in production next year, or there will be a real shortage.''

    The Federal Reserve Bank of Kansas City said Aug. 15 that credit conditions in the second quarter , the most recent data available, ``showed signs of deterioration'' in the seven-state region that includes Kansas, the biggest U.S. producer of winter wheat. Loan-repayment rates fell for the first time since 2006 as wheat slid 7.6 percent in the quarter. Wheat lost another 41 percent since then.

    ``This year is going to be the best year ever and now we are looking at the potential to give it all back in 2009 if prices don't rise above the expected cost of production,'' said Mark Kraft , 49, who grows corn and soybeans in Normal, Illinois. ``You have to hope that fertilizer, seed and land rents come down and the price of corn improves.''

    Lower Prices, Higher Costs

    Wheat fell to $5.1625 a bushel on the Chicago Board of Trade on Oct. 24, touching a 16-month low of $4.965. On Feb. 27, it reached a record $13.495. Corn fell 7.5 percent last week and touched a one-year low of $3.64 a bushel today, compared with a peak of $7.9925 on June 27. Soybeans fell 4.4 percent last week to $8.67 a bushel and are down 47 percent from a record $16.3675 on July 3. Rough-rice futures are down 41 percent to $14.685 per 100 pounds from $25.07, the highest ever, on April 24.

    One 80,000-kernel bag of Monsanto Co. corn seed, enough for about 2.5 acres, rose 45 percent this year to $320, the same amount Midwest tenant farmers paid to rent an acre of land, Kraft said. A gallon of diesel for tractors averaged $4.47 in the third quarter, up 51 percent from a year earlier, according to AAA, the largest U.S. motorist organization.

    The value of the collateral farmers use to secure loans -- crops and land -- is diminishing. Lenders are demanding more equity for farm loans used to run operations or acquire land and equipment.

    ``We need two to three times the amount of money we used to need with the same collateral,'' said Bo Stone , 37, a seventh- generation farmer in Rowland, North Carolina. ``It means we have way more risk than we've ever had. This is a time where one bad crop year, with the amount of money and input tied up, could potentially cost you your equipment, land and livelihood.''

    To contact the reporters on this story: Carlos Caminada in Sao Paulo at at [email protected]; Shruti Date Singh in Chicago at [email protected]; Jeff Wilson in Chicago at [email protected]

    Last Updated: October 27, 2008 09:13 EDT

    CUIABA, Brazil, May 20 (Reuters) - Brazil may nationalize privately held mineral deposits used to make fertilizer to bring down farm production costs, Agriculture Minister Reinhold Stephanes said.

    The threat from Latin America's farming powerhouse, which is heavily dependent on fertilizer imports, is the latest in a regional trend to bring natural resources under greater state control as world oil and food prices push new highs.

    Fertilizer prices have doubled over the past year.

    "If it's necessary, yes, if it's necessary," the minister said on Monday night to the question of whether the state would repossess private concessions in the mining sector.

    He was speaking at an event in Brazil's No. 1 soybean producing state of Mato Grosso.

    Mato Grosso Governor Blairo Maggi, who has a controlling stake in the world's largest soybean producer, Amaggi, said the government was studying all the mineral deposits in Brazil that would provide phosphate and potassium for fertilizer.

    The government would decide on whether to repossess mineral deposits and give them to state-run companies or others in the private sector to return fertilizer prices to levels four months ago, he said.

    Brazil imports 80 percent of its potassium and 60 percent of its phosphorus. It is also a major importer of nitrogen. Prices for all of these have skyrocketed with increased world demand for agricultural crops.

    Some fertilizers, such as nitrogen, are also made from petroleum products and have suffered price increases as world oil prices hit daily records.

    Brazil may begin producing most of its own nitrogen fertilizer once a giant new natural gas field off the coast of Rio de Janeiro comes online, Energy Minister Edison Lobao has said. Brazil is in the midst of a natural gas supply shortage at present, however.

    Stephanes said nitrogen production from gas could start in two years, but this was unlikely as large offshore oil and gas fields take closer to a decade to bring to production and the Jupiter find was announced in January. [ID:nN22258408]

    Stephanes said fertilizers were a strategic sector for Brazil, which is Latin America's largest agricultural producer.

    The farm sector makes up more than 15 percent of Brazil's economy.

    Brazil is the world's largest producer and exporter of coffee, sugar and orange juice and a major producer of soy and corn.

    The government and the productive sector have expressed frustration over the concentration of Brazil's fertilizer sector in a handful of companies, which include large multinational grains traders such as Bunge Ltd (BG.N: Quote , Profile , Research , Stock Buzz ) and Cargill.

    Part of the supply problem in Brazil's fertilizer sector stems from the risks investors face. Increased output of potassium, for example, depends on the exploration of deep underground deposits in the Amazon, where environmental red tape deters development.

    "It's a very big deposit that could supply nearly all of what Brazil could use," Stephanes said.

    Brazil's environmental minister of the past five years, Marina Silva, resigned last week, frustrated with President Luiz Inacio Lula da Silva's push to expand and consolidate economic development at the cost of the environment.

    The sharp rise in farm production costs have prompted analysts to limit their forecasts of Brazil's potential to expand output to meet demand from the new middle class in the fast growing emerging markets. [ID:nN13391921] (Reporting by Jonas da Silva; Writing by Reese Ewing; Editing by Walter Bagley)

    LAHORE - President Pakistan Kissan Movement, Ch Ashfaq has strongly criticized the non-availability of fertilizer in the market by saying that the shortage would badly affect the yields of different agricultural crops.
    He said this while completing the tour of Punjab and while arriving at Lahore and talking to newsmen said that the farmers are running from pillar to post to find fertilizer but certain black marketers and dealers of fertilizer have hidden their fertilizer stocks in their secret godowns and are indulging into black marketing, demanding high prices like Rs.50 70 extra on each fertilizer bag. Now the situation is that poor farmers standing crops like sugarcane, plantation of cotton and rice are planted without fertilizer and wheat yields the farmers would get that worries me.
    He appealed to the PM and CM Punjab to take strict action against such black market mafia by recovering the hidden fertilizer out of the godowns of the mafia in order to ensure availability and supply of this commodity in the market so as to enable the farmers to get at the Government announced rates.
    He also apprehended that if this situation continued, resultantly next year there are chances of serious crisis, which would not be only in food but in all agriculture commodities as their yields would considerably drop. The country might get into another agricultural crisis. In order to avert such crisis govt should move fast to control the fertilizer prices by taking strict action against the fertilizer factory owners and fertilizer dealers so as to save the farmers from the clutches of such elements who are bent upon sucking the blood of poor farmers.

    Economic climate pushes wheat acreage lower

    Oct 30, 2008 10:29 AM, By Lamar James
    Arkansas Extension Specialist

    Arkansas farmers are expected to plant significantly fewer acres of wheat this fall because of the nation’s economic climate.

    Last year, business was booming for wheat farmers. They planted 28,000 acres of wheat in Lincoln County, compared to a normal acreage of 7,000 to 8,000, according Chad Norton, Lincoln County Extension agent with the University of Arkansas Division of Agriculture.

    “Some farmers have told us that lenders don’t want to loan money because the delivery basis — the difference between the Chicago price and what farmers actually get — at the grain elevator is so wide and fertilizer costs have been so high,” Norton said.

    Grain boom may not be dead, but the future is murky

    Kevin Hursh, The StarPhoenix

    Published: Wednesday, October 29, 2008

    Is this the end of the highly publicized grain boom or is this just a lull before the gravy train resumes?

    Faster than anyone predicted, grain prices have come crashing down. It started before the stock market plunge, but the world economic crisis has taken a big toll on the grain sector.

    The biggest worry is next year. Grain prices are still quite strong by historical standards, but input costs have skyrocketed, particularly the price for fertilizer. Crop budgets for next year do not look pretty.

    Unfortunately for growers, there isn't much evidence of lower fertilizer prices at the retail level. In fact, many farm input suppliers continue to say fertilizer prices will not be dropping.

    No doubt the supply chain is filled with high-priced product. With the hope fertilizer prices may drop, more farmers are now sitting and waiting rather than pre-buying for next year.

    Will the lower prices being reported internationally work their way through the system? How much of a price drop is reasonable to expect?

    Unless fertilizer prices at the grower level drop dramatically, there will be considerably less fertilizer used. That will mean reduced production for crops that are highly dependent on added nutrients -- crops such as canola, corn and even wheat.

    The world grew a big crop this year and supplies are not as short as a year ago. However, stocks-to-use ratios are still tight from a historical perspective. Smaller crops in 2009 could send the markets sharply higher. The grain boom would be renewed.

    World Rice Demand to Climb on Credit Crisis, Slowdown (Update3)

    By Liza Lin and Paul Gordon


    More Photos/Details

    Oct. 28 (Bloomberg) -- Demand for rice will increase because the economic slowdown will force poor people to eat more in place of meat, said Robert Zeigler, director-general of the International Rice Research Institute.

    The credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries, analysts say.

    ``The price has been rising steadily'' since 2000 because ``we've failed to invest,'' Zeigler said. ``The financial crisis suggests we may not turn those investments around and that leads me to the inescapable conclusion that upward pressure'' on prices will continue, he said.

    More Hunger

    The number of hungry around the world is at risk of increasing as the lending slump cuts investment in agriculture and crops, according to Abdolreza Abbassian, secretary of the Intergovernmental Group on Grains at the United Nations Food and Agriculture Organization in Rome.

    ``If fertilizer remains expensive and importers are unable to get credit to buy it, that has an immediate impact on production,'' said Zeigler from the Philippines-based institute.

    Millions could starve as fertilizer prices soar

    John Vidal


    World’s poorest farmers hardest hit by crisis; cost could remain high for three years, says a U.N. report.


    — Photo: Kiran Bakale
    While the unprecedented price explosion has barely affected commercial farmers, it is leading to civil unrest among the small farmers in developing countries.

    A global fertilizer crisis caused by high oil prices and the U.S. rush to biofuel crops is reducing the harvests of the world’s poorest farmers and could lead to millions more people going hungry, according to the U.N. and global food analysts. Optimism that soaring food commodity prices could lift millions of developing country farmers out of poverty and lead to more food being grown have been dashed, says the U.N.

    A world fertilizer forecast report, due to be published by the U.N. this week but seen by the Guardian, states that prices will remain high for at least three years and possibly longer. Prices have mostly doubled and in some cases risen by 500 per cent in 15 months as U.S. farmers have rushed to plant more biofuel crops, and countries such as India and China have bought fertilizer stocks in large quantities to guarantee food stocks. But while the unprecedented price explosion has barely affected commercial farmers, it is leading to civil unrest among small farmers in developing countries. There have been fertilizer riots or demonstrations in Vietnam, India, Kenya, Nepal, Nigeria, Egypt, Pakistan and Taiwan in the past few months. Last week a man was killed in a stampede at a government handout of fertilizer in Hyderabad, India.

    Dr. Jan Poulisse, senior U.N. Food and Agriculture Organisation analyst, warned that the poor were at risk. “High commodity prices allow commercial farmers in developed countries to cope with high fertilizer prices. But rising food prices hurt subsistence farmers, particularly in Africa,” Mr. Poulisse said.

    In dire straits

    “People just cannot afford [fertilizer]. They were in dire straits before but now the situation is worse.” Farmers in sub-Saharan Africa have been hardest hit because they have the least chance to benefit from soaring food prices, but desperately need fertilizers to replenish nutrient-depleted soils.
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