A Fertilizer Flurry

By all early indications, 2007 may be the year fertilizer retailers, distributors, and producers have been dreaming of since the 21st century began. If the market analysts are correct, it will be an extremely memorable (and profitable) year for everyone involved in the fertilizer trade — thanks in large part to corn.

Truthfully, fertilizer hasn’t been exactly suffering recently. According to data collected in the annual CropLife® 100 retailers survey, fertilizer sales increased 3.5% during 2006 to $5.9 billion. This led all crop inputs with a 44% share of total market sales.

Despite this growth, retailers in 2006 noted there was significant push back from grower-customers on many fertilizer types as prices remained high and commodity prices stayed low. “There was increased shopping around for the best price, a reluctance to build inventories because of price uncertainty, and an all-around cash flow strain,” said one retailer. This situation was further complicated by a drop in planted corn acreage — historically one of the most fertilizer-dependent crops — down from 81.6 million acres in 2005 to 79.4 million acres in 2006.

All this is poised to change in 2007, however. According to statistics from USDA, corn acreage is projected to rebound to 83 million acres this year, an increase of 4.5% compared with the 2006 total. Almost all of this growth is tied directly to the anticipated demand for corn from ethanol producers, which has already pushed the per-bushel price of corn to more than $3.30. At present, approximately 15% of the U.S. corn crop is used to make ethanol, but this percentage is expected to climb significantly as more ethanol plants come onstream.According to David Delaney, president of PCS Sales, this will translate into a completely different fertilizer picture. “Because of low corn and wheat prices and high energy input costs, U.S. growers have been drawing down soil nutrient levels without replacing those nutrients,” says Delaney. “That appears about to change as corn and wheat futures — key drivers of fertilizer use — are much stronger than they were several months ago. USDA has slashed its corn ending stocks estimate from 2.2 billion bushels for the 2005-06 crop year to 1.1 billion bushels for the 2006-07 year, reflecting growth in ethanol production that is much stronger than expected, plus increasing export demand.”

Based upon this data, Estelle Gras­set, public affairs specialist for The Fertilizer Institute, speculates 2007 will be an exceptional year for fertilizer. “Using recent application rate data, an additional 1 million acres planted of corn would require 65,000 nutrient tons of nitrogen, 23,000 nutrient tons of phosphate, and 27,000 nutrient tons of potash,” says Grasset.

N-Chanted Growth

Looking at the individual macronutrient segments, nitrogen-based fertilizers stand to benefit the most from the increased corn crop. According to Jeff Holzman, an analyst in the business development and strategy group for Agrium, the high water mark for nitrogen (N) usage recently was 2004, when 12.7 million short tons were applied. Since that time, however, demand has been dropping. “U.S. nitrogen demand declined over the past two years due to high input costs and relatively low grain prices,” said Holzman, speaking at the 2007 Fertilizer Out­look and Technology Conference. As a result, the final usage number for N in 2006 was 11.7 million short tons.

But this year, N demand should re­bound nicely. According to the projections, total N usage should increase almost 6% to 12.4 million short tons. “Demand in 2007 should be supported by higher corn acres and crop prices,” said Holzman.

As with N, phosphate (P) also had its best consumption occur in 2004. According to Corey Giasson, manager of market research for Potash Corp. of Saskatchewan Inc. (PotashCorp), P usage in that year was 4.8 million metric tons. But since then, consumption has fallen — down 4% in 2005 to 4.6 million metric tons and 11% in 2006 to 4.1 million metric tons. “This decline was due to continued weakness in commodity prices, higher energy input costs, and uncertainty about planting decisions,” said Giasson.

In 2007, P consumption is projected to follow the same curve as N. Total usage should increase 11% to 4.6 million metric tons. “This will be due to higher grain prices, an increase in corn acres, and the need to replace soil nutrients,” he said.

Potash Recovery

As for the outlook for potash (K), Michael Rahm, vice president of market & economic analysis for The Mosaic Co., believes it should also improve following a difficult 2006. “We estimate that U.S. potash use dropped 9% to 10% last year due to the shift from corn to soybeans and a decline in application rates,” said Rahm. “A major de-stocking of a full domestic distribution pipeline accounted for the rest of the decline in shipments in 2005-06. North American potash shipments declined 22% to just 5.6 million tons. That was the lowest domestic volume since 1982-83, when a special payment-in-kind program unexpectedly pulled an additional 49 million acres out of production on top of the 29 million already idled as a result of U.S. farm programs.”

Luckily, this K hangover won’t last. “We forecast that U.S. potash will rebound 7% to 8% in 2006-07 as result of a large increase in projected corn acreage and a partial recovery in application rates,” he said. “As a result, North American shipments are projected to increase 22% to 6.8 million tons of K in 2006-07.”

In the short term, added Rahm, 2007 could be just the beginning of some incredibly profitable years for U.S. agriculture. “U.S. corn stocks are projected to fall not as a result of a supply shock but rather due to impressive growth in corn use during the last few years,” he said. “Increases in ethanol production have accounted for most of the recent growth in U.S. corn use and projected exponential increases in ethanol production are expected to fuel even larger increases in domestic corn use during the next few years.”

Ever Upward

According to USDA long-range projections, corn acreage should continue to climb through the end of the decade. By 2010, there might be 87.5 million acres of corn being planted in the country, an increase of 5.4% from today’s mark. Despite this fact, analysts predict that this boost in acreage still won’t be enough to cover demand as ethanol expands. Consequently, said Rahm, corn prices will continue to improve.

“The new crop price of corn today is more than $1 per bushel higher than a year ago and that difference looks like it will continue to widen,” he said.

Besides tracking corn prices and ethanol growth, 2007 also marks the end of the current Farm Bill. Accord­ing to PCS’ Delaney, there is expected to be extensive debate over many aspects of the bill, including the size of the U.S. budget deficit, farm safety nets, and the environment. This makes it unlikely a new Farm Bill will be in place for the start of 2007-08, so growers will use the current bill for fall fertilizer decisions.

“While the structure of the next Farm Bill is presently unclear, soaring corn demand for ethanol production and tightness in world supplies of most crops suggest that rising crop prices may reduce the bill’s importance,” he says.

Leave a Reply

Fertilizer Stories

FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
Aerial view of the West Fertilizer explosion site
FertilizerFertilizer Companies Blame City For West, TX, Explosion
August 6, 2014
El Dorado Chemical Co. and CF Industries contend the city failed to properly train the first responders and had insufficient protocols in place to battle the April 17, 2013, blaze at West Fertilizer Co. that triggered the explosion. Read More
FertilizerThe Fertilizer Institute: New President, Renewed Energy
February 3, 2014
Chris Jahn relishes the opportunity to lead the organization through the challenging times ahead. Read More
FertilizerA New Cycle For Fertilizer Demand
January 2, 2014
Changes in the corn market could have a major impact on the crop nutrients sector in 2014, say experts. Read More

Trending Articles

Crop InputsPlatform Specialty Products To Acquire Arysta LifeScience
October 20, 2014
Once the acquisition is complete, Platform Specialty Products will combine Arysta LifeScience with previously acquired companies Agriphar and Chemtura Crop Solutions. Read More
Seed/BiotechMonsanto Offers New Support For Ferguson, Area Communities
October 8, 2014
Monsanto Co. has committed $1 million in new support for several collaborative efforts in Ferguson, MO, and surrounding communities in North St. Louis County. Read More
Seed/BiotechUnapproved Genetically Modified Wheat Found In Montana
October 3, 2014
USDA reports that one year after discovery of Monsanto's unapproved wheat in a single Oregon field disrupted U.S. wheat export sales, the GMO wheat has again been found in Montana. Read More
Equipment2014 Product Of The Year Voting
September 19, 2014
The deadline to vote for the 2014 CropLife IRON Product of the Year is October 31. Please cast your vote today to help us determine the winner. Read More
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More

Latest News

InsecticidesValent U.S.A., MGK Form Marketing Agreement
October 24, 2014
Valent has formed an agreement with Minneapolis-based MGK to manage the marketing and sales of MGK’s crop protection line of insect control products within the U.S. beginning April 1, 2015. Read More
StewardshipFlorida’s 4R Advocate Keeps Improving
October 24, 2014
Florida farmer Alan Jones uses the 4R principles of nutrient stewardship as the core of his fertility program, which allows him to maximize production and keep costs in check. Read More
Seed/BiotechMonsanto Named One Of The World’s Best Multinational …
October 23, 2014
Monsanto ranked No. 8 in the world’s largest annual study of workplace excellence that identifies the top 25 best multinational companies in terms of workplace culture. Read More
Crop InputsArysta Hires Former Agri-Chem, CPS Employee For Delta S…
October 23, 2014
New Territory Sales Manager Mark Peel’s primary role will focus on working with growers regarding fungicides in Louisiana, Mississippi, Arkansas and Tennessee. Read More
CropLife 100GROWMARK Announces Appointments In Plant Food Division
October 22, 2014
GROWMARK, Inc. has announced the three key staff changes in its Plant Food Division. Read More
CropLife 100GROWMARK Appoints New VP Of Finance And Risk Management
October 22, 2014
Wade Mittelstadt has been named GROWMARK Vice President, Financial and Risk Mangement, effective December 1, 2014. Read More
FungicidesEPA Approves BASF In-Furrow Corn Fungicide
October 22, 2014
Field trials show Xanthion In-furrow fungicide provides more rapid emergence, extended residual control and improved seedling health than untreated crops. Read More
EquipmentAgraScout App Available At No Cost To Universities
October 21, 2014
AgraScout, a fast and easy to use mobile crop scouting app, is now available at no cost to University students, Read More
LegislationNew Farm Bill Program To Provide Relief To Farmers Affe…
October 21, 2014
The USDA has implemented a new Farm Bill initiative that will provide relief to farmers affected by severe weather, including drought. Read More
ManagementGreenfield Scholars Program Aims To Sustain Agronomy Wo…
October 21, 2014
The program encourages talented students to study agronomy, crop and soil sciences while cultivating networks to develop the necessary workforce to sustain the profession. Read More
Paul SchrimpfPrecision Ag: Taking It To The Hill
October 21, 2014
A new coalition took the good news message of precision agriculture to Washington, DC, last month. Read More
ManagementUSDA Awards $18 Million In Small Business Research Gran…
October 21, 2014
The grants will provide high quality, advanced research and development that will lead to technological innovations and solutions for American agriculture. Read More
FertilizerCF Industries Terminates Merger Discussions With Yara I…
October 21, 2014
CF Industries Holdings and Yara International have terminated their discussions regarding a potential merger of equals transaction. Read More
Seed/BiotechSyngenta Ranked A Top 10 Biotech Employer For Third tim…
October 20, 2014
Syngenta ranked in the top 10 among the world’s top biotech employers, according to an annual survey conducted by Science magazine. Read More
CropLife 100Wheat Growers Break Ground For New Facility At Kennebec
October 20, 2014
Wheat Growers has broke ground for a state-of-the-art shuttle loader grain handling, fertilizer and agronomy facility in Kennebec, SD. Read More
FertilizerVerdesian Life Sciences Signs Agreement With Los Alamos…
October 20, 2014
Verdesian Life Sciences has signed a licensing agreement with Los Alamos National Laboratory to develop and market LANL’s latest nitrogen enhancement technology for plants. Read More
MicronutrientsStoller Group Announces Groundbreaking At New Office Bu…
October 20, 2014
Jerry Stoller, founder and president of Stoller Group, announced the groundbreaking at the site of the company’s future headquarters in Read More
Crop InputsBioSafe Systems Opens New Production Facility In Nevada
October 20, 2014
BioSafe Systems has completed construction of a state-of-art production facility in Sparks, NV, for its line of activated peroxygen products. Read More