CF Industries (NYSE: CF) reported Q2 EPS of $1.49, in-line with the analyst estimate of $1.49. Revenue for the quarter came in at $1.31 billion versus the consensus estimate of $1.31 billion.

Outlook

CF Industries entered the third quarter with an excellent order book for ammonia and UAN, supporting an expectation of 2016 fertilizer year demand consistent with 2015 levels.

Wet weather and reduced yield estimates, especially for corn, had driven price increases in grains, giving farmers opportunities to lock in positive returns for the 2015 crop. As a result, the company forecasts farmers to plant 89.5 million acres of corn next year, compared to 88.9 million acres in the current year. This is expected to support steady North American nitrogen fertilizer demand, including direct application of ammonia in the fall season.

Given current projections for total urea demand and supply from outside of China, Chinese urea exports are expected to surpass 12 million tons in 2015. Additionally, new operating capacity for urea outside of China is estimated at 5.5 million tons in 2015, which will be the largest single-year volume increase since the mid-1980s. Even with the additional capacity, Chinese anthracite coal-based production will continue to be the marginal global supplier. The global capacity additions will keep pressure on urea and other nitrogen fertilizer prices, particularly UAN. North American demand for UAN is projected essentially unchanged in 2016 compared to 2015.

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