Agricultural Production

Trends in Europe and Impact

on Demand for Fertilisers
View from RaboResearch Food &
Agribusiness

Harry Smit, 19 October 2017

Rabobank Group present
worldwide, dedicated to Food &
Agribusiness
Short term outlook
 Agri commodity markets in their
downcycle
USD/bushel EUR/tonne
20 500
Oversupply Tight Tighter Downcycle

16 400

12 300

8 200

4 100

0 0
2001

2003
2000

2002

2004
2005
2006
2007
2008
2009

2011

2013
2010

2012

2014
2015
2016
2017
Wheat CBOT Corn CBOT Soybeans CBOT Wheat Matiff (RHS)
Source: Bloomberg, Rabobank Agri Commodity Monthly, 2017
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 Currency volatility expected to
come down
145

135
Index (Q22017 = 100)

125

115

105

95

85

75
03/01/2014 03/01/2015 03/01/2016 03/01/2017 03/01/2018
EUR AUD BRL PLN GBP
Source: Bloomberg, Rabobank 2017
5
Farmer Crop Plans Vary Worldwide
France Poland
Corn rapeseed
18% 18%

Barley wheat
20% Wheat barley 56%
62% 26%

UK Netherlands
Rape seed Sugar
19% beet
19%
Potatoes
41%
Wheat
51%

Barley
30% Wheat
40%

Source: Rabobank Field Crop Margin Outlook, 2017

Farmer Crop Plans Vary Worldwide
US (Mid West) US (Great Plains)

Soybeans Corn Fallow Wheat

50% 50% 50% 50%

Brazil (Mato Grosso) Australia (NSW)

Canola
Soy + 14%
safrinha
corn in the Barley
same year 14%
40%
Soy only
60%
Wheat
72%

Source: Rabobank Field Crop Margin Outlook, 2017

 Farmer margins: France
recovering, Poland stable
France Poland
2,000 5,000
1,800 4,500
1,600 4,000
1,400 3,500
1,200 3,000
EUR/ha

PLN/ha
1,000 2,500
800 2,000
600 1,500
400 1,000
200 500
- -

Fertiliser Seed fertiliser seed

Crop protection Fuel costs crop protection fuel costs
Land rent Gross margin land rent gross margin
Total income total income
Source: Rabobank Field Crop Margin Outlook, 2017
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 UK moving up, NL down in 2018

UK Netherlands
1,600 6,000
1,400 5,000
1,200
1,000 4,000

EUR/ha
GBP/ha

800 3,000
600 2,000
400
200 1,000
- -

Fertiliser Seed Fertiliser Seed

Crop protection Fuel costs Crop protection Fuel costs
Land rent Gross margin Land rent Gross margin
Total income Total income
Source: Rabobank Field Crop Margin Outlook, 2017
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 US sustained margin pressure

US-Midwest US Great Plains

2,500 1,000
900
2,000 800
USD/hectare

700
1,500 600

USD/ha
500
1,000 400
300
500 200
100
-
-

Fertiliser Seed Fertiliser Seed

Crop protection Fuel costs Crop protection Fuel costs
Land rent Gross margin Land rent Gross margin
Total Income Total income
Source: Rabobank Field Crop Margin Outlook, 2017
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 Brazil pressure mounting,
Australia severely down
Brazil Mato Grosso Australia New South Wales
5,000 700
4,500
600
4,000
3,500 500
3,000

AUD/ha
BRL/ha

400
2,500
2,000 300
1,500 200
1,000
100
500
- -

Fertiliser Seed Fertiliser Seed

Crop protection Fuel costs Crop protection Fuel costs
Land rent Gross margin Land rent margin
Total income total income
Source: Rabobank Field Crop Margin Outlook, 2017
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Agri commodity cycle at its
lowest point
INCOME PEAKS 2013

2014-
2015
1. Reduce equipment
purchases

2. Cutback/minimize
fertilizer applications RECOVERY LAGS
2016
3. Switch to 6. Optimize yield
5. Establish
cheaper seed
planting
4. Negotiate for lower discipline
land costs

2017
Operating capital dries up
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 Short term outlook fertiliser
prices: flat
1400

1200

1000
Rabobank
800 outlook:
flat
600

400

200

0
Jul-04

Nov-13
Mar-02

Mar-09

Sep-12
Oct-02

Dec-03

Oct-09
May-10

Apr-13

May-17
Feb-05

Jan-15
Aug-15
May-03

Sep-05
Apr-06
Nov-06
Jun-07

Jul-11

Mar-16
Oct-16

Jul-18
Jan-01
Aug-01

Jan-08

Dec-10
Aug-08

Feb-12

Dec-17
Jun-14
urea prilled black sea USD/t DAP US Gulf USD/t Potash Standard Vancouver USD/t

Source: CRU, Rabobank, 2017

13
Long term demand outlook

14
 Nitrogen fertiliser application
rate related to yield
More is not always better

180
[CELLRANGE]
yield (index, 100=global average)

160
[CELLRANGE]
140 US
[CELLRANGE]
120 [CELLRANGE]
[CELLRANGE][CELLRANGE] [CELLRANGE]
100 [CELLRANGE]
[CELLRANGE] [CELLRANGE]
[CELLRANGE] Vietnam
[CELLRANGE]
80 [CELLRANGE] [CELLRANGE]
60 [CELLRANGE]
40 [CELLRANGE]
20
0
0 50 100 150 200
application rate (index, 100=global average)
Source: Rabobank (based on FAO, IFA data) 2016
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 Nitrogen fertiliser efficiency per
country
How to step up fertiliser efficiency?
200
177
180
160
160 147
Fertiliser efficiency Index

139
140 130 129
120 118
120 104 103 102
95
100 89
81 76
80 63 59 58
60
40
20
0

Source: Rabobank (based on FAO, IFA data) 2016

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The decline in the Dutch mineral
fertiliser market
Introduction
of manure
Demand for fertiliser in NL
legislation
800
700
1,000 tonnes nutrient

600
500
400
300
200
100
0
1961
1964
1967

1991
1994
1997

2003
2000

2006
2009
1973
1970

1976
1979

2012
1982

2015
1985
1988

Grand Total N Grand Total P2O5 Grand Total K2O

Source: IFA, Rabobank, 2017
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Yields continued to grow,
i.e. fertiliser efficiency went up
Yields of key crops increased further Supply of animal manure was stable
MT/ha MT/ha 1,600
100 10 1,400
80 8 1,200
60 6 1,000
800
40 4
600
20 2 400
- - 200
1961
1967

1991
1997
2003
2009
1973
1979
1985

1961
1967

1991
1997
2003
2009
1973
1979
1985
potatoes sugar beet
wheat (RHS) N P K

18
NL is an extreme case, but some
regions are comparable
Total availability of nutrients per hectare
800
kg N+P+K / hectare

700
600
500
400
300
200
100
0
Austria
Netherlands

Greece
Portugal
Germany

Poland
Spain

Lithuania
Italy

Croatia
Ireland

France

Hungary

Bulgaria
Sweden

Romania
Denmark

Slovakia
United Kingdom
Belgium

Slovenia

nutrients available from manure Mineral fertiliser use

19
Characteristics of farming model
important in predicting demand
US farming model Farm size (ha/farm)
Dutch farming model
2,473 scarce and
expensive
scarce
abundant and 84 abundant
cheap
soybeans Crop plan ($/ha)
1,66 4,770 wheat potatoes
0

corn sugar beets

Input use (kg nutrient/ha)

Low
input 47 152 High
use input
use

Source: Rabobank, 2016

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 Agriculture around the world in
various stages of the lifecycle
China Western Europe
Fertiliser
application India
Netherlands
rate
Rest Asia US
Land scarce
agricultural Brazil
model
Land abundant agricultural model
Africa Russia

Time

Source: Rabobank
21
Half of world market still
growing, other half stabilising
Mature Western and
Oceania
Central Europe
Africa
North
America
Latin America
and the
Carribbean

Eastern Europe Asia East

and Central From yield maximisation
Asia to input optimisation
Asia South
Asia West
Gradual
intensification
Source: IFA, Rabobank 2017
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Thank you for your attention
[email protected]

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