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

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
FertilizerOSHA Hammers West Fertilizer With Over $100K In Fines For April Explosion
October 10, 2013
The Occupational Safety and Health Administration is fining the parent company of the West Fertilizer plant, Adair Grain Inc., $118,300 for 24 violations. Read More
FertilizerTFI Appeals Chesapeake Bay TMDL Ruling
October 10, 2013
The Fertilizer Institute joined a coalition appealing a U.S. District Court ruling on the Chesapeake Bay Total Maximum Daily Load (TMDL) for nitrogen and phosphorus. Read More

Trending Articles

Green Valley Ag facility
Retail FacilitiesGreen Valley Ag Adopts A.J. Sackett’s Precision Fertilizer Blending® Technology At New Facility
July 8, 2014
Sackett's Precision Fertilizer Blending® Technology is making huge strides around the world. Green Valley Ag adopts the technology at its new facility to support its advancing agronomic needs. Read More
Retail FacilitiesWaconia Manufacturing Builds Facility Designed For Speed, Efficiency
July 7, 2014
To make its new hub facility more efficient, Cooperative Elevator enlisted the aid of Waconia Manufacturing. Read More
EquipmentSummer Show Preview 2014: Superior Sprayers Take The Field
July 3, 2014
In this final installment of our coverage of the major categories of Big IRON that retailers can expect to test-drive at this summer’s events, here is a look at 19 sprayers. Read More
Scouting a soybean patch at Green Valley Ag.
EmployeesCropLife Compensation Survey: Battling Talent Drain
July 2, 2014
Retailers too often lose employees to companies outside of agriculture, while recruiting efforts are most often limited to competitors and other ag-focused organizations. Read More
HerbicidesDow AgroSciences Introduces SureStart II Herbicide
June 16, 2014
The enhanced formulation has improved viscosity and increased stability under heat and controls more than 60 high-anxiety grasses and broadleaf weeds found in corn fields. Read More
HerbicidesBASF Investing $270 Million To Expand U.S. Herbicide Production
June 11, 2014
BASF has invested more than $270 million to expand herbicide production capacities in the U.S., including more than 20 new products to be launched over next two years. Read More

Latest News

StewardshipMonsanto Joins Panel Of Innovators To Advance Research …
July 30, 2014
Monsanto Co. and The Climate Corp., its division, recently joined a roundtable of experts at the White House to share ideas and research approaches to help the world’s farmers manage and adapt to the impact of climate change on the global food supply. Read More
Crop InputsSoybean Checkoff Produces Big ROI
July 30, 2014
Under the soy checkoff program, all U.S. soybean farmers contribute a small percentage of their gross soybean sales for research and marketing projects that maximize their profit potential. Read More
CropLife 100Learfield Sports, CHS Agree To Football-Centric, Colleg…
July 30, 2014
CHS Inc. will embark on a highly integrated collegiate sports sponsorship platform with 24 Division I universities in 19 states designed to reach the farmer-owned cooperative's rural owners and customers. Read More
LegislationUSDA Implements Key Farm Bill Crop Insurance Provision
July 30, 2014
The new Supplemental Coverage Option, available through the federal crop insurance program and set to begin with the 2015 crop year, is designed to help protect producers from yield and market volatility. Read More
CropLife 100Wilbur-Ellis Forms New Organizational Structure For Its…
July 30, 2014
The new structure will provide more responsive internal support and will allow regional vice presidents and area managers to spend more time with customers, on talent development and on operational excellence across branches. Read More
Palmer pigweed in cotton
HerbicidesNew Training Modules On Herbicide Resistance Now Availa…
July 30, 2014
The Weed Science Society of America has announced the availability of three new education modules on herbicide resistance in weeds. Read More
HerbicidesWillowood To Market Glufosinate
July 28, 2014
Willowood USA recently announced that Federal EPA has approved its technical registration for glufosinate. Read More
InsecticidesHow To Scout For Corn Earworms In Corn
July 28, 2014
In her weekly report, University of Missouri Agronomy Specialist Jill Scheidt discusses what to look for when scouting for corn earworm. Read More
Crop InputsDuPont Pioneer, Weyerhaeuser Enter Technology License A…
July 28, 2014
The agreement brings together agricultural and forestry know-how to sustainably improve crop productivity for corn growers around the world. Read More
EquipmentAGCO Launches Global iPad App
July 28, 2014
The free AGCO Global iPad App can be downloaded from the Apple iTunes Store and features the full family of RoGator self-propelled sprayers and TerraGator high-floatation spreaders. Read More
Eric SfiligojYuma Centennial Ag Supply Earns 2014 National Environme…
July 28, 2014
Colorado-based ag retailer receives top trophy in 24th annual DuPont Crop Protection/CropLife ceremony. Read More
CropLife 100Pinnacle Forms Alliance With Wildlife Managment, Seed O…
July 25, 2014
The strategic alliance will provide Tecomate with key wildlife products, processing facilities, distribution centers and sales through Pinnacle’s ever-growing retail network. Read More
ManagementFranken Presses White House On RFS Support
July 25, 2014
Al Franken and a group of Senate democrats recently met with senior White House official John Podesta to urge the administration to change its position on an EPA proposal. Read More
ManagementASA, FarmLink To Launch ‘Operation Benchmark̵…
July 25, 2014
The American Soybean Association (ASA) and FarmLink are teaming up to help farmers close the $11 billion gap between what they harvested in 2013 and what they could harvest annually. Read More
StewardshipNorthey: Farmers Commit $1.4 Million to Try New Water Q…
July 25, 2014
The practices that are eligible for funding include cover crops, no-till or strip till and using a nitrification inhibitor when applying fall fertilizer. Read More
Precision AgFarmers Learn How Changing World Will Impact Iowa
July 24, 2014
Technology and understanding global consumer demand for Iowa farm products brought hundreds of farmers and agribusiness leaders to Ames recently for the annual Iowa Farm Bureau Federation Economic Summit. Read More
HerbicidesPurdue: Late Season Weeds May Require Manual Removal
July 24, 2014
Hand-rouging and pulling late season weeds by hand may be the best way to remove them, more so than using a herbicide, a Purdue Extension weed scientist says. Read More
Soybean Field
InsecticidesTransform WG, Closer SC Insecticides Receive R&D 10…
July 23, 2014
Dow AgroSciences has received the award from R&D Magazine for Transform WG insecticide and Closer SC insecticide with Isoclast active. Read More