“Chemical company DuPont has seen shares tumble, after it trimmed its full-year earnings forecast, lowering expectations for sales in its farm segment due to ”continuing weakness in global agricultural markets".
The US conglomerate, for which relies on seed and agrichemicals for more than one-third of sales, has faced seen demand for inputs wane as farmers tighten their belts.
DuPont said has lowered its total forecast earnings for this year to $3.10 per share, down from earlier guidance of $4.00–4.20 per share, citing a “challenging” global agriculture market, as well as currency effects.
DuPont, which owns the seed company Pioneer, said it expects “continuing strong headwinds” for its agriculture sector in 2015, thanks the effect of the weak Brazilian real, and a fall in global corn planted areas.
The group forecast an operation loss for the agriculture segment in the three months to September 30.
The group reported that the South American agricultural season, which is currently underway, was seeing a “slow start as farmers remain cautious given the economic environment”.
DuPont’s agriculture business has already seen earnings fall thanks to lower sales volumes and currency effects.
DuPont noted “weaker demand in global crop protection markets, reduced expectations for corn area in Latin America, and lower than expected soybean volumes in North America”.
In the three months to June 30, DuPont’s agriculture segment sales were $3.2bn, down 11% from the same time last year.
The group reported “lower corn planted area in North America and globally in the first half of the year”, as well as a fall in soybean seed demand, leading to a 7% fall in seed sales.
Meanwhile agricultural chemical sales were down 21% thanks to “weaker market demand from farmers looking to reduce input costs and delay purchases, lower insect pressure in Brazil and the impact of higher inventories in the Americas”.
“Traders’ concerns over the dent to Russian grain shipments from an export levy have ”appeared accurate", US farm officials said, even amid talk of Moscow adding further red tape to the tariff regime.
US Department of Agriculture officials in Moscow highlighted warnings from the grain trade over Russia’s imposition this month of a levy which, in essence, takes 50% of the value of wheat exported at a price above 11,000 roubles a tonne.
“Industry analysts and traders consider that this floating duty will inhibit future trading in grain, [and] will give the Russian customs service uncontrolled authority for manipulation of the size of the duty,” the USDA’s Moscow bureau said in a report.
The levy will also “make exports of durum wheat, which only recently began to recover in Russia, uncompetitive because the contact price of this wheat in US dollars is high”, meaning it will attract a higher levy than lower-priced grain.
Still, even for cheaper wheat, the bureau highlighted the uncertainty surrounding the levy, given that it is applied on rouble prices of a commodity traded internationally in dollars, at a time of volatile exchanges rates.
At Wednesday’s exchange rate, the levy threshold would kick in at $182.37 a tonne.
However, at the rate a month ago, exports would have appeared free of tax below $200.64 a tonne, leaving a trader who sold then, but shipped now, potentially liable for some $9 a tonne in unforeseen tax payments – equivalent potentially to all their margin on a deal.
The downturn in exports since the levy kicked in “showed that traders’ concerns [over the levy] appeared accurate”, the bureau said.
So far in 2015–16, which also started on July 1, Russia’s overall grain exports have fallen by 34% to 1.3m tonnes, although this may reflect a slower start to harvest too, with farmers having reaped 7.4m acres as of Thursday, compared with 10.3m acres a year before.
More red tape?
The comments came even as Russia’s farm ministry is proposing to add to exporters’ obligations by forcing them to register all contracts with Rosselkhoznadzor, the food safety watchdog, within five working days of sending the grain abroad or after they had signed a contract
According to the Interfax news agency, the ministry has proposed the scheme in a letter to Arkady Dvorkovich, the deputy prime minister in charge of agriculture.
Russia’s grain exporters have a scepticism over handing information to officials, given the government’s record of interfering in the market, including through outright bans on shipments.
Rosselkhoznadzor has a record of imposing trade bans, largely on imports, notably of meat, but was also linked to grain export curbs early this year."
"An easing in potash prices, spurred by higher-than-thought US inventories, is close to an end, Intrepid Potash said, viewing the drier Midwest weather boosting crop hopes as a fillip to demand for the nutrient too.
“We feel like we are getting very close to a floor or at a floor in the market on these prices,” said Kelvin Feist, senior vice-president of sales and marketing at the US potash producer, adding that “there are lots of people asking for various things”.
"We believe the farmer is going to step up here at some point.
“We know that they’ve removed a lot of nutrient over the last few years and that should drive them to put on the appropriate rates here this fall,” Mr Feist told investors, saying that Intrepid Potash was “comfortable with the demand side”.
Falling prices, sales
The comments followed an April-to-June quarter in which Intrepid Potash sold potash at $358 per short ton, up from the $329 per short ton achieved a year before, but $4 below the price achieved in the first three months of the year.
Market prices have continued to ease since, said Bob Jornayvaz, the group’s chairman and chief executive.
Sales volumes, at 377,000 short tons for the first half of 2015, were down 21% year on year, and below the range of 400,000–415,000 short tons forecast in April by the group, which highlighted a double whammy from weather and bigger than expected stocks.
“Agricultural sales were impacted by wet spring weather and light summer field purchases as inventory levels of many customers were higher than expected as they exited the spring,” said Brian Frantz, the group’s chief accounting officer.
‘Very, very wet spring’
On weather, the group underlined the dent to demand from heavy rains in key markets in the southern Plains and western Corn Belt.
In Texas, “a great market for us… where we had been experiencing drought, we experienced flooding in the months of May and June”, a factor which “delayed consumption”, Mr Jornayvaz said.
"When we came from drought to significant amounts of rain, it happened right in the middle of the spring [fertilizer application] season
“If you look at eastern New Mexico, the entire state of Texas, Oklahoma, Missouri, we saw a very, very wet spring.”
"Wet weather has cost Kazakhstan the chance of a recovery in its wheat output – and indeed left farmers, whose crop last year was hurt by rains, facing the weather risks entailed with a late harvest.
The US Department of Agriculture bureau in Astana forecast a second successive year of declining wheat output in Kazakhstan, to 12.8m tonnes, rather than the increase to 13.5m tonnes that the department itself has forecast.
And the bureau signalled the potential for further losses, given that harvest looks like being delayed until October.
“If October is wet, then it will be hard to avoid low-quality and losses,” the bureau said.
‘Significant negative impact’
The caution reflected rains which had started in mid-September last year, “lasted through the end of fall and continued as snow,” and resumed in mid-May, leaving soil “oversaturated” when the 2015 spring sowing programme began.
“Some experts believe that delays in planting in northern Kazakhstan reached one month, which has a significant negative impact on vegetation development.”
Furthermore, some 15–20% of crop officially reported as planted in northern Kazakhstan in fact went unseeded.
“Farmers with insufficient machinery were only able to complete 50–60% of their sowing,” the bureau said.
And growers who did better on plantings are grappling with the weeds and wheat rust, a fungal disease, encouraged by the wet weather.
Dent to exports
A poor quality crop would represent a second in a row for Kazakhstan, which saw its 2014–15 harvest affected by the rains which started in September, just when combines are typically beginning to roll.
In some areas this allowed “no chance for normal maturation and harvesting”, forcing growers to leave crop standing through the winter for harvesting in a dry spell in April.
However, the bureau also noted that "grain exporters confirm that Kazakhstani exports in 2014–15 were affected by the poor quality of wheat produced.
“The 2014–15 Kazakh crop had a malty flavour, lower test weight and lower protein content.”
Kazakh wheat exports in 2014–15, on a September-to-August basis, were forecast down 26% at 6.0m tonnes, a level at which they were expected to remain in 2015–16."
"A tornado and violent thunder storm ripped through southwestern Manitoba last night, destroying cattle sheds and machine shops and flattening crops from Pierson to Virden, Man.
Manitoba tornado survivor ‘feeling lucky that we’re here’
Archie McPherson, who farms near Reston, Man., described it as the most ferocious thunder storm of his life.
“It’s the most intense storm I’ve ever witnessed and I’m pensioner age. It just sounded like a cannon going off outside the house,” said McPherson, reeve of the Rural Municipality of Pipestone."