"Lower potash bills won't prevent farm income slump"

Where a couple of the big deflation stories of the week meet up: the collapse of corn prices and the disintegration of the potash cartel.

December corn is down another penny at $4.66 but seems to be firming after yesterday's spanking.
The potash producers have resumed the downtrend after yesterday's modest gains.

From Agrimoney:

The prospect of a slump in potash prices will not spare farmers a sharp drop in income, being dwarfed by the impact of a collapse in crop prices, Macquarie warned.

The bank came in with a relatively low estimate for potash prices in 2014 - thanks to the break-up of the Belarusian Potash Company, one of the market's two big cartels – downgrading its forecast for average prices by $65 a tonne to $296 a tonne.

Many other observers, such as Credit Suisse, have forecast prices remaining well above $300 a tonne for all but potentially China, flagging the impact of lower values in stimulating demand.

Even so, "the impact of lower potash prices to the farmer will be only modestly positive" for farmers facing tumbling crop values in the face of better prospects for world harvests of major grains and oilseeds, Macquarie said.

Fall in fertilizer bills

The fall in potash prices will cut bills for US corn farmers by some $6.50 an acre to about $18.50 an acre, the bank said.

However, potash accounts for only a small account of farmers' total costs, which Macquarie estimated at well over $800 an acre for corn.

"Generally speaking, fertilizer costs as a whole account for less than 20% of total operating costs" in the US, and Brazil too, although potash accounts for more of total nutrient spending in the South American country, where farmers tend to prioritise soybeans.

That cuts their use of nitrogen, with soybeans fixing their own nitrogen.

'Incomes will remain strained'

Meanwhile, a drop from $7.00 a bushel to $4.50 a bushel in corn prices would slash about $400 an acre from US growers' revenues.

"Any positives associated with lower potash costs will pale in comparison to the declining grain price moves," the bank said....MORE

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