The Energy Report: Do you rely on the stock-to-use ratio to predict grain prices and, if so, what is it telling you right now?

Spencer Churchill: Yes, we do. Stock-to-use is a good way of assessing the degree of tightness in any crop market and hence how much underlying support there could be for prices. The lower the amount of “buffer” there is—the amount of stocks or inventory relative to the total usage or demand—the tighter this market could become and the greater the likelihood of higher prices. In North America, by ranking of lowest to highest stock-to-use ratio expected for 2015–2016, we would expect price support/appreciation for 1) canola, 2) soybeans, 3) corn, and 4) wheat.

TER: How is the drought in the Western U.S. impacting projections for ag prices in the coming years?

SC: The states most affected by the drought are generally not large producers of the key crops we follow with regard to fertilizer usage—corn, soy, wheat—so we wouldn't expect much of an impact here. The potential impact would be more on fruit and vegetable prices of which these states are large producers.

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TER: Asia's population has quadrupled in the last century according to World Population Review. Do you expect to see continued population growth and urbanization in China and India, and what impact would that have on demand for food?

SC: This continues to be one of the most commonly cited macro trends for agriculture. Larger and wealthier developing world populations generally consume greater amounts of food, and dietary changes like eating more meat also put upward pressure on demand. We agree; however, as experiences in the past several years have shown, other macro variables, such as greenfield/brownfield projects, planted acres, government policies, crop prices and farm income, have a much more influential effect on the demand and prices of fertilizer and other ag products.