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Mike Howell (00:08):
The Dirt with me, Mike Howell, an eKonomics podcast where I present the down and dirty agronomic science to help grow crops and bottom lines. Inspired by eKonomics.com, farming’s go-to informational resource, I’m here to break down the latest crop nutrition research, use and issues helping farmers make better business decisions through actionable insights. Let’s dig in. Listeners, welcome back to The Dirt. We’ve got a familiar face with us today. We haven’t had him on yet this season, but glad to have Mark Tully back in the studio with us. Mark always brings us a lot of good information, information that everybody’s always wanting to hear, and we did get some reports in today. The USDA just released their planted acreage report and Mark has been hurriedly running through those numbers, and we’ll get to that during the recording today. Before we get started, Mark, welcome back to The Dirt and if you would, remind our listeners who you are and what you do.
Mark Tully (01:07):
Hey, thanks for having me again, Mike. I am Mark Tully and I work at Nutrien as a manager of our global market research team. So big name for all things macro and ag economics really, is what we do in the market research group at Nutrien.
Mike Howell (01:21):
Okay, Mark. Well, let’s dive right in and see what we can learn today. We first started doing these a couple of years ago and I think the first time we had you on, the war in Ukraine, it just got started and it seems like every time we do a podcast, we end up mentioning that. I’m going to try to steer clear of that topic today, but I’m sure you’ll drag us back to that before we get finished. Let’s go back and talk about 2022. We knew fertilizer prices were at all time highs then. Fortunately, we had commodity prices that were close to all time high at that time as well. 2023, we saw those start tapering off. Where do we stand today compared to our historical averages for things like NP and K? What are those prices looking like?
Mark Tully (02:01):
Yeah, you’re exactly right, Mike. If we go back to our first conversation, we were talking about a world of global fertilizer supply constraints and climbing our way to record high prices in some markets across NPK fertilizers, and today, it does feel like we’re in a very different market environment. When we look at key nitrogen fertilizers really around the globe, they’re trading in line with long run average price levels, if not $25 to $50 a ton cheaper than those 10-year average levels depending on the product line.
(02:31):
A similar story in potash. Potash prices have pretty consistently traded below their 10-year average levels in 2024 with key spot markets down, say 50 to 60 bucks a ton below their 10-year average levels and generally making, I think, potash looked quite affordable even at today’s crop pricing.
(02:49):
The one unique market continues to be phosphates, where tight inventories and key markets like India, Brazil and the United States have been met with supply limitations and it’s keeping prices well above the 10-year average levels, but certainly well below those peak prices we were talking about in 2022. Nonetheless, I think a little bit different than what we’re experiencing in nitrogen in potash markets today.
Mike Howell (03:12):
Mark, you mentioned supply shortages in some places. What other factors could be driving these prices like we’re seeing today?
Mark Tully (03:19):
It’s a really good question and maybe I’ll do a walk around by product starting with nitrogen. I think really going back to 2023, we’ve seen nitrogen supply be largely balanced, really across global markets. And although we’ve seen some pricing volatility due to in-year turnarounds or curtailments or unexpected rises in natural gas prices, on a calendar year basis, I think nitrogen fertilizers have been relatively more stable than maybe they were when we go back to those starting Ukraine war periods. Structurally in nitrogen markets, we still do have supply constraints. We’re seeing European producers not produce nitrogen fertilizers to the level they were pre-war and that’s due to gas availability and gas pricing in that region. We’ve also seen some curtailments of particularly Russian exportable ammonia in the marketplace that still hasn’t come back to pre-war levels today, but it’s largely been offset, I think by production in other parts of the world and balancing the global S&D from that perspective.
(04:22):
Today though, we are still seeing some of those in-year shutdowns that are resulting in some price appreciation around the globe, particularly in urea markets at the moment, but there’s some gas availability issues in Trinidad and in Egypt today due to really hot weather in Egypt. We’re also seeing China really pull back on their export availability of urea. Fertilizer consumption in China has been at really record levels going back to 2023. Year to date, China’s only exported about 65,000 tons of urea, and last year through May, they’d already exported well over 700,000 tons. So that’s something that’s been impacting markets certainly in the near term, but I go back to the original statement. I think nitrogen markets from a supply versus demand perspective have largely been balanced and that’s why we’re seeing pricing trade at the levels below 10-year averages today.
Mike Howell (05:12):
Mark, you mentioned something there. You mentioned Egypt and I was going to ask you about that. I was on a call earlier today and they were mentioning some energy concerns in Egypt. We know that’s a big producer of nitrogen that’s transported globally. What’s going on in the Egyptian area?
Mark Tully (05:26):
So Egypt is a big exporter of urea all around the globe, but definitely into Europe. And what we’ve seen of late is some really, really high temperatures in Egypt today, and so as a result of that, it’s a big draw on their energy grid, right? You have air conditioners that are running and that requires additional natural gas and additional throughput of that energy grid at this time of year and so they’ve got to pull back on some of their big industrial consumers of natural gas at this period of time, just to balance the gas supply to run the grid and make sure they’ve got interior temperatures that are comfortable when you’ve got record high outside temperatures.
(06:05):
I think headlines this week were saying that all major urea producers were turned off in Egypt at this point in time because of those gas restrictions, but we have seen some volatility to that, so when temperatures were cooler, even just going back a week ago, we started to see some of those plants pop back up, but they came right back down again as things got hotter. I don’t think this is something that we’re going to deal with through the balance of the calendar year by any means, but in these peak summer temperature months, definitely a risk that these plants stay offline just to be able to support the energy needs in the country at the moment.
Mike Howell (06:38):
We definitely know how the hot weather can affect this energy grid. I’m in South Mississippi and it’s been pushing a hundred every day this week. Mark, I didn’t mean to cut you off. Go ahead and finish up with P and K.
Mark Tully (06:49):
No, that’s no problem. And it’s something I don’t know as a northern Canadian, but glad I don’t have to experience it so much. So I’ll flip over to potash next and just talk through what we’re experiencing there fundamentally. But ultimately, again, this is a market where going back a couple of years, we saw some pretty significant supply constraints that drove prices up. And today, I think we’re in a market environment where supply is much more balanced relative to demand and so even in a market where we’re seeing really high demand. And really approaching the high end of even our team’s internal demand expectations in 2024 with continuation of record consumption in China, really strong demand at the moment from Latin America and Brazil in preparation for their next growing season. Demand in North America has been really strong and we’ve seen rebounding demand in places like Southeast Asia this year, but even with all that demand, it’s been balanced, right?
(07:41):
We have Canadian producers supplying the market well. We’ve seen increased availability of Russian product in the market this year and so on whole, the market’s been able to balance itself from a supply and demand perspective and we continue to see those prices trade at average to below average levels currently. And then lastly on phosphate, the one market that continues to be unique relative to nitrogen and potash, I mentioned before we’re going into this year, several key markets were relatively tight on inventories of dry phosphate fertilizers and continue to be tight at the moment. So looking at United States and Canada, you look at Brazil today, their imports of MAP are down pretty significantly year over year ahead of their growing season and intuitively, their inventories are quite tight as well.
(08:26):
India, another market that has fairly tight inventories relative to history. And so at the moment we kind of have all of these markets engaging, looking for a phosphate fertilizer material, but limited export availability around the globe. The big reason being China’s pullback of export availability, keeping domestic production closer to home and in country with that really strong consumption and so limited tons coming out of China today, and is forcing of those other big phosphate producers to just redirect tons around the globe to fill that gap. Overall, we’re in a market environment where producers have tight availability and need to supply where there’s gaps and at the same point in time, you have buyers who just don’t have enough inventory today ahead of their key growing seasons, and it’s just creating an overall global feeling of tightness in phosphate fertilizers that’s keeping those prices elevated relative to average levels.
Mike Howell (09:22):
The Dirt is your home for agronomic topics that boost your crop knowledge and profitability, but it only scratches the surface on what eKonomics has to offer. See for yourself while eKonomics is known as farming’s go-to information resource. Check it out at nutrien-eKonomics, with a K, dot com. Mark, let’s switch gears a little bit and talk about our grain prices. It seems like everywhere I go, farmers are all complaining about the grain prices. Prices seem to be coming down and I say grain, all of our crop prices seem to be coming down. I know cotton has taken a really big hit this year. It started off the year up close to a dollar and now I’m scared to even look at it. It’s came way down. What’s going on with our grain prices and what our growers need to understand about our grain prices this time of year?
Mark Tully (10:11):
Ultimately, I think our view is that we’ve returned to somewhat of a more normal crop commodity environment with prices trading near historical average levels and in some cases below historical average levels today. There’s some deviation across crops like you mentioned with cotton versus some of the grains and oilseeds. And certainly some upside in some international markets when we take into account FX, foreign exchange effects and their different domestic supply and demand fundamentals. But across the key North American row crops, I think we generally see prices in that average range today as we enter this sort of more normal fundamental environment.
(10:48):
I think in fairness, it’s pretty rare at this time of year to see crop prices climbing drastically. As we’re in an environment usually without some kind of major planting challenge during the spring months, you tend to sit back and see, well, we’ve got a new crop coming and that’s going to add supply. And as a result, generally speaking, the markets tend to depress this time of year. But the reality is, it’s a challenging market environment for our North American grower today, particularly on cash rented land and growers are absolutely facing higher labor and equipment costs and inflation along with everybody else in this market environment. And so with that lower crop pricing, it absolutely can tighten margins relative to what they’ve experienced the last couple of years.
(11:31):
I think what’s important to keep in mind though is that fundamentally, when we look around the globe, grain stocks have not rebuilt to historically normal levels and in fact, across many key crops remain tight relative to history. So as we look forward through the balance of this calendar year, it’s still our view that I think any production challenge of materiality could result in upside to market prices today. I think a great example that is when we look at the wheat rally we saw in April and May on the back of concerns around Russian drought and reduced production and export availability out of that region. We saw a pretty steep incline to wheat pricing as a result of that. I think as we move through this back half of the year, events like that could result in some directional shift to crop prices.
Mike Howell (12:13):
Mark, one thing everybody always wants to know is, what the weather conditions are and what the USDA final acreage report is. I know that report came out just a few minutes ago and you were looking through that before we recorded. What are our acres looking like for this year?
Mark Tully (12:27):
Yeah, it was just released, I think, literally minutes before we hopped on the call here today to record. Corn’s up relative to what was published in March. So in March, the [inaudible 00:12:37] was 90 million acres. The June acreage report produced 91.5 million acres and that exceeded, I think, the high end of trade expectations ahead of the report, and we’re certainly seeing corn prices trade down today after the release of that report. I think the one thing we’ll have to watch ultimately is what’s the harvested acreage out there and what’s the yield. And so, ahead of the report, which wouldn’t have been captured in the report, we were aware of some heavy, heavy rains, particularly in the northern part of the corn belt, and that potentially resulted in some field flooding and maybe some acres that won’t end up being harvested. I think around the United States today, there’s still some concern as we look out to the long-term forecast around potential for dryness and what that can mean for crop yields.
(13:20):
So both of those things, I think we’ll have to watch really closely on corn to see what the ultimate production is. But at the moment, definitely a surprise I think to the upside on corn acres relative to what was previously published. Looking at beans, down a little bit relative to March, so the report in March had 86.5 Million acres of planted soybean. The report here today is 86.1. So down a little bit relative to the March expectation, but still up about 2.5 million acres versus last year. I think there’s certainly no major concern in terms of productivity from a total volume perspective with those acres that are being planted today. So I think those are the two big headline crops that are driving the market at the moment and certain traders were watching ahead of the release today. A bit of a surprise to the high end on corn acres and soybeans, kind of right in the range of what expectations were.
Mike Howell (14:12):
Mark, that’s not the news that everybody was wanting to hear as far as price coming back up, but maybe that’ll help fill these bins back up and get the supply back where it needs to be. Mark, the last thing we wanted to talk about is south of the equator. I know they’re probably full swing harvest right now or maybe wrapping up harvest in South America, maybe Australia. What can you tell us about those markets and how that’s going to affect this world economy?
Mark Tully (14:34):
Definitely wrapping up harvest when we’re looking at the Latin American markets today, on a year-over-year basis, bit of a mixed bag. Argentina, definitely more productive and a better harvest in the first half of 2024 relative to what they were at last year. But in Brazil, heavy flooding in the southern part of the country and some drought conditions as well, really impacted total soybean volume and total corn volume out of that region this calendar year. From an impact to the prices, I would say pretty minimal as we’re pretty late into the harvest and I would say most of this is old information. People were aware of what the weather had done, what the yields were looking like, and so I think it’s probably largely priced into the market today. What’s really important as we turn over into the second half of this calendar year is the next planting season. The next crop of soybeans is going to go into the ground in Brazil in that late summer September/October timeframe.
(15:29):
That certainly can be a driver of price and it’s at that time when in North America, we’re pulling our crop out of the ground. And so something we’ll have to watch pretty closely is what the plant and acreage expectations are in Brazil and Latin America at that time of the year and what the weather looks like. We are flipping to a La Niña type weather pattern and generally speaking, that can bring some dryness to parts of Brazil and Argentina and other parts of Southern Latin America. So we’ll have to see how that plays out in their next growing season. From an Australian perspective, with that weather pattern shift, I think moisture has been pretty good in their grain belt for this growing season and for their winter crop. I know in the very western part of Australia, there’s certainly some concerns of dryness, but nothing I think coming out of Australia today that’s a major concern from a global supply and demand perspective, impacting crop prices and [inaudible 00:16:22] I think growers out there are expected to have a pretty decent harvest.
Mike Howell (16:25):
Mark, we appreciate you sharing all this information with us. As we wrap this up today, is there anything that we may have missed or do you have any take-home messages that you want to share with our listeners before we go?
Mark Tully (16:35):
Yeah, I think as we get into the heart of this growing season and as we get into pollination, we’ll have to really watch what the weather looks like in North America. I reiterate the point that globally, from a supply-side perspective, fundamentally, we’re in an environment where grain stocks remain tight relative to history. And so, although we’re at the moment I think facing a lot of supply-based pressure on grain and oilseed prices, I think we’ll have to watch really, really closely what ultimately production looks like around not only North America, but other key growing regions to be the driver of price in the second half of this year and really give us that information that we need to make decisions about how we’re going to market the crop in North America later this year.
Mike Howell (17:21):
Mark, we really appreciate you taking time to join us today. I know everybody always gets a lot out of what you share with us. Listeners, we hope you’ve enjoyed this segment today. I want to invite you to stay tuned and we’ll come back with segment two here in just a few minutes. Listeners, I hope you enjoyed the first segment of today’s show. If you did, please take a minute and give us a rating on your favorite podcast channel or app, and give us some feedback as well. We want to hear from you to help make the show even better and don’t keep it to yourself. Please share these episodes with coworkers, family, friends, anyone you think may benefit from the information we’re sharing here. Don’t forget to visit our website, nutrien-eKonomics, with a K, dot com, to help find the latest crop nutrition news and research information as well as market updates, a growing degree day calculator, a nutrient use calculator, a rainfall tracker, and much, much more.
(18:15):
It’s all at nutrien-eKonomics, with a K, dot com. Most episodes of The Dirt are now available for CCA credits. Visit our website and click on the agronomics tab to find these CCA credit opportunities. And if you have a question, you can ask one of our agronomy team members. Simply ask your question and one of us will get back with you. Thanks for listening. Now, segment two of The Dirt. Listeners, welcome back for segment two as we continue our tour around North America, looking at different research experiment stations. Today, we’re excited to have with us, Dr. Ron Heiniger with North Carolina State. Dr. Heiniger, welcome to The Dirt.
Dr. Ron Heiniger (18:56):
Thanks for having me, Mike. I really appreciate it.
Mike Howell (18:59):
Dr. Heiniger, before we get into it too far, if you will, kind of introduce yourself to our listeners and let them know what you do.
Dr. Ron Heiniger (19:05):
Yes, I’m Dr. Ron Heiniger. I’m at North Carolina State University. I’m a cropping system specialist. Most of my work is in applied research, working out of the Vernon James Center here in eastern North Carolina. I work primarily with corn production, but do some wheat, soybeans, even some cotton work from time to time, and thus, the cropping systems moniker on my title.
Mike Howell (19:29):
Okay, well, Dr. Heiniger, we’re right in the middle of the summer and I know some crops are having a tough time, some crops are doing really good. Kind of give us an update in your part of the world. How are the crops looking?
Dr. Ron Heiniger (19:39):
Well, it’s been tough, Mike. We’re in a historic drought, is what they’ve called it, a once in a 100-year drought. Corn has been really tough. We’re seeing a lot, about 40 to 50% of the corn acres here in the state are probably already lost due to drought and the rest of it, it was in desperate need of a rain. We are, as of Sunday night, getting some rain here in North Carolina, so maybe that’ll start to relieve the dry conditions, but we’ve got a ways to go.
(20:08):
Corn’s pretty bad shape here. We’re already seeing some abandoning of those acres. Soybeans has been holding on. Of course, they’re capable of slowing down their development and so far, they’ve eked along. Cotton likes hot weather and a little dry, and so it’s continued to move along a little bit. It doesn’t look too bad yet. And of course, tobacco being the primary crop in North Carolina and under a drought, looks really good right now still. So yeah, we’re fighting this dry condition here, but overall, crops are just slowed down and corn certainly has taken the brunt of it.
Mike Howell (20:47):
Yeah, we hate to hear that. We know all about the droughts Fortunately, it’s not nearly as bad here as it was last year, but I understand y’all are having a pretty tough time in North Carolina. Hopefully, we can get some rains in over that way and get things back on track before it gets too terrible late. Dr. Heiniger, what we wanted to talk about today was the Vernon James Center. I know you’re stationed there, so if you will give us a little history about the Vernon James Center.
Dr. Ron Heiniger (21:11):
Yes. The Vernon James Center is somewhat unique in North Carolina compared to most research operations across the United States because we’re a joint operation between North Carolina State University and the North Carolina Department of Agriculture and Consumer Services. The field work that we have ongoing on this research station is mostly conducted and monitored by the Department of Agriculture. The university maintains lab space here and offices, which I’m certainly in one of those offices, in which we conduct the research of, do the planning. And we do this in collaboration or coordination with our partners in North Carolina Department of Ag so that we can conduct field scale research on a number of crops here. We got everything from corn to rice and even aquaculture and hog and cattle operations here on this state. So a wide diversity of different types of agricultural research goes on here, but at very unique situation. We have high quality laboratory facilities. We do some DNA extractions here, a lot of greenhouse work that goes on in this facility, so quite a research station. We’re very proud of it.
Mike Howell (22:27):
And how long has that station been in operation?
Dr. Ron Heiniger (22:30):
The Department of Agriculture at North Carolina State have had this collaboration since the early 1920s out here. The station where I’m at actually is fairly new in that the buildings and lab facilities were constructed in 1990 and finished in 1994 when they started to hire a number of different research specialists here. I should say that there’s a number of different disciplines represented at this station. There’s crop in systems, as I’ve just pointed out. We’ve got an anemologist, we got a potato breeder, we’ve had pathologists located here. We’ve got a soil specialist, an irrigation specialist. So a number of different disciplines represented on the station here, which is really interesting, a nice collaboration group that covers many different aspects of crop and livestock production.
Mike Howell (23:24):
Dr. Heiniger, in my travels around, I’ve found it interesting that some of these research farms do have quite a diverse staff and looking at all aspects of agriculture and some specialize in one aspect and I can’t say which way is better. Everyone has its own unique purpose, but I can’t say I’ve been to the Vernon James Center numerous times and I’m always impressed when I get there.
Dr. Ron Heiniger (23:44):
The originator’s philosophy was to do an integrated systems type approach, looking at different aspects of crops and everything from genetics all the way to soil fertility and plant management. So it is an interesting group and like you say, it’s really a comparison to a specialty versus some diversification in that process.
Mike Howell (24:06):
So Dr. Heiniger, I know that that station’s been there for a number of years and there’s been a lot of significant happenings that’s gone on there. If you would talk a little bit about some of the significant contributions that have came out of the Vernon James Center?
Dr. Ron Heiniger (24:18):
We’re extremely proud of the things that we’ve made a difference in. That’s what we were established for, to make a difference for farmers and the community and in the state, and we’re proud of that. First of all, in corn production, we were the first to discover how to control billbug. I know billbug is an unusual insect for the rest of the country, but billbug is a devastating insect on corn. It’s a swamp creature, and it was one of the reasons why corn production has struggled in Eastern North Carolina.
(24:48):
And one of the neat contributions was the collaboration between my group and etymologist here and identified some tools, particularly neonicotinoids, that seed treatments that could be used to control billbug to the point where now, billbug is not a serious pest. Now it’s still out there, but it’s so far, not been a serious pest in the last several years, allowing us to increase our corn production. So that’s one example.
(25:15):
Cotton is another. On the Blacklands soils, which are predominant in Eastern North Carolina. These are highly organic soils. Cotton in the old days would grow too big. You had weed control problems. All these things, we’re trying to grow cotton on these organic soils, but because of the integration of the group here, we’ve been able to develop management practices and use of growth regulators and new herbicides, and allowed cotton [inaudible 00:25:41] integrated and now, there’s large acres of cotton on these organic soils.
(25:46):
So that was a direct result of a lot of the applied work that came through the Vernon James Center. We could talk about potato breeding. Not many people know that we’re one of the largest potato breeding operations in the United States here, developing potatoes adapted at higher temperatures and those kind of thing. And the last thing I might mention was we were instrumental in some of the early biomass research and trying to identify how you could grow biomass for biofuels and those kinds of things, looking at some of that. Some very interesting outcomes from the work that had been done here at the Vernon James Center.
Mike Howell (26:24):
Dr. Heiniger, I know you could keep going on and on with a list of accomplishments, but one thing that stands out in my mind, it’s been four or five years ago, I was at a meeting there in North Carolina. And the Vernon James Center was recognized as achieving the highest yield on corn that year. And I think that may be the only example of a research station that won the state yield contest. Talk a little bit about that.
Dr. Ron Heiniger (26:46):
Yeah, that’s exactly right. We got very interested… You’ve heard about these high yield producers winning national contests. We got very interested here in the state of North Carolina, try to identify what combination of practices could be used to reach those high yield levels. And so we conducted some work here on the station, integrating different starter practices, looking at fertility through the season, use of some of the things like ESN, which helped delay nitrogen release into the grain field period. So we did a lot of interesting things, unique type of approaches to try to get to, and we indeed achieved that [inaudible 00:27:27] bushel yield that we were targeting. Now, I know the world record’s higher than that, but certainly in North Carolina, that was a remarkable achievement to be able to do that, and we did it, like I said at the beginning, in collaboration with our [inaudible 00:27:42] state NCDA partner, and we recognized their contribution with the yield reward that year.
Mike Howell (27:49):
Well, Dr. Heiniger, this last question is one that I’m asking everybody this year. We know agriculture is changing. We’ve got new technology coming out every year, and we’re also faced with the dilemma of urban sprawl and other things that are taking over land area. We know that the future of agriculture is changing and we know that these research farms are going to have to change to keep up with the times. What’s your vision for the next 50 years there at the research center? What are they going to have to do in order to keep up with the changing pace of agriculture?
Dr. Ron Heiniger (28:16):
That’s a great question because indeed, agriculture’s changing, the equipment that farmers are using, the technologies they’re using, and it becomes essential for us here in research to be able to utilize those same approaches. In other words, understand what farmers are working with so that we can help them manage it better. And I’m proud to say that this station has taken a lead. The state overall, North Carolina has taken a lead in trying to equip these research stations to be a next-generation operation.
(28:48):
For instance, we now have wireless integrated across the entire station so that we can use handheld computers, tractor guidance systems, automatically upload data to the internet or to the cloud, and that’s been a tremendous leap forward where you start to get more equipment equipped with automatic guidance, as I mentioned already, but also systems that actually allow the planter to be adjusted on the go or on the fly to record sensor data from equipment to back into our cloud and get that into our research database. It is going to be important.
(29:27):
It’s hard to stay up with the rate that these farmers are increasing their technology and the rate in which they’re integrating things into GIS systems and all the precision ag materials that they’re working with, but that’s where we are. We’re trying to use drones and do aerial imaging, do aerial fungicide applications. That’s our goal, is to try to stay with farmers or try to get ahead of them if you can ever do that, so that you can provide them with real good information on what they should be doing to manage in a better way. It’s all about managing. It’s for efficiency and better productivity if we’re going to meet the demands of food and agriculture in the future.
Mike Howell (30:11):
Well, Dr. Heiniger, we sure appreciate you taking a few minutes to visit with us today. We appreciate all your efforts there in the state of North Carolina and getting this research information out to the farmers, where it can benefit them and benefit the consumers. Listeners, we appreciate you tuning in today. And as always, if you have questions on anything we’ve talked about today, you can visit our website. That’s nutrien-eKonomics, with a K, dot com. And until next time, this has been Mike Howell with The Dirt.
