Rabo Analysts See Limited Acreage Shift

OMAHA (DTN) -- The price shocks facing farmers might not dramatically reshape U.S. acreage this spring, but analysts at Rabobank warn the more profound impacts may unfold globally and potentially hit U.S. farmers in 2027.

Stephen Nicholson, Rabobank's global strategist for grains and oilseeds, and Samuel Taylor, an analyst for farm inputs, said the fertilizer markets have reacted sharply since the war began at the end of February, but those price moves likely won't translate into widespread changes in planting plans in the U.S.

ACREAGE FORECAST

Rabobank's baseline outlook released this week points to just under 96 million acres of corn and a 2-million-acre bump in soybean plantings to just over 83 million acres, despite widespread discussion about rising input costs.

That's still nearly 2 million more acres of corn than USDA initially projected last month at the Agricultural Outlook Forum. USDA will update its projections in the Prospective Plantings report on March 31.

"We've debated and we've argued, we've discussed the acreage number and it looks like acreage numbers are all over the place," Nicholson said. He added, "We haven't heard any anecdotal evidence of a farmer who is making big changes in their planting discussions based on the fertilizer prices yet."

Nicholson added, "We're probably a little low on corn acres compared to what people think they should be."

GLOBAL PRESSURES COULD RESHAPE SUPPLY

While U.S. tariffs and duties have dissuaded imports of phosphates, the market since early March has encouraged more phosphate exports from the U.S. to Brazil, Taylor said.

"We saw some volumes leaving or committing to leaving because you could export phosphates from North America to Brazil, factor in freight, and get a premium on it," Taylor said.

While U.S. acreage may remain relatively stable, Rabobank warned rising fertilizer and fuel costs could have a larger impact on global crop production.

Brazil, India and Australia are key areas of concern, with Brazil facing a combination of high interest rates, rising diesel costs and tightening fertilizer supply windows.

Emerging markets face even steeper challenges. Fertilizer prices approaching $800 per ton raise serious credit concerns in regions with less access to financing, potentially leading to reduced application rates and lower yields.

"That runs the risk that this is going to hit the neediest the most," Taylor said, pointing to vulnerable regions in Africa and South Asia.

HUMANITARIAN RISKS

All of this will affect farmers in parts of the world who don't have the same levels of access to credit or the safety net of American farmers.

"This is my biggest concern is that if you think about the amount of money it cost the grower, but also the value chain ... it does run the risk that this is going to hit the neediest the most," Taylor said.

Already companies such as Yara International have said they are reducing fertilizer production in India because of supply shocks that have halted liquid natural gas exports through the Strait of Hormuz.

"We've already seen some commitments of phosphates to India, for example, for April delivery, are at a significant premium to domestic pricing at the moment," Taylor said.

As some developing countries have learned in the past, fertilizer shortages can topple governments. That was the case five years ago when Sri Lanka's government opted to not import fertilizer or pesticides, which led to a dramatic yield decline in rice. The price spikes for food sparked protests that forced Sri Lanka's president out of power.

All of this could also lead Russia and China to expand their influence by supporting farmers in Asia and Africa to fill their fertilizer needs, Taylor said.

"They're not going to just hand fertilizer out left, right and center, but it is an opportunity with which to build soft power in a lot of these geographies ... and create a big quid pro quo as well," he said. "You can imagine that if China, which is not in the export market for fertilizers right now, they could probably parlay some beneficial access to resources in nutrient-scarce regions if this continues. So, the whole thing is very profound in my view."

SLOW BRAZILIAN EXPANSION?

Those pressures could slow Brazil's long-running expansion in crop acreage, particularly for soybeans. Brazilian farmers rely more heavily on imported fertilizer than U.S. growers.

"There's already talk in Brazil about maybe the area doesn't expand next year," Nicholson said.

Despite Brazil's high volume of exports, the country also has its overleveraged farmers who are paying higher interest rates for operating loans than in the U.S. Higher fertilizer and diesel prices will compound their problems as well.

"If you go out in the country and interior and you get a lower price for your soybeans and then you are paying higher fertilizer -- phosphates for example -- it just exacerbates a problem that is already there," Nicholson said.

He added, "There is already talk in Brazil that maybe the area doesn't expand next year. It doesn't contract, but you won't see the expansion in Brazil that you've seen in the past several years."

LIMITED BENEFIT FROM VENEZUELA IMPORTS

Last week's move by the Trump administration to allow urea imports from Venezuela also is unlikely to significantly ease supply constraints, Taylor said.

Venezuela's nitrogen production remains well below capacity, with exports estimated at under 500,000 tons annually, which is a small fraction of U.S. demand. And that assumes all of the country's nitrogen fertilizer production flows to the U.S.

"It's a rounding error," Taylor said.

LONGER-TERM CHEMICAL RISKS

Chemicals aren't often highlighted as a major ripple effect, but petroleum has a lot of byproducts. One is naphtha, which is used in everything from plastics to producing other chemicals such as benzene.

Then benzene is an intermediate chemical for the building blocks for 2, 4-D, dicamba and atrazine.

Asian countries with major petrochemical industries first raised concerns about naphtha stockpiles and their reliance on imports from the Middle East.

Sulfur is another chemical that plays into the production of fungicides.

"Across the expanse of a year, this will start to hit and chemistry prices will hit farmers as well," Taylor said.

Also see, "Fertilizer Surge Tied to War Leaves More Farmers Exposed to Higher Planting Costs," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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