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

FertilizerNutrient Management, Conservation Among Topics Covered At Indiana CCA Conference
November 23, 2016
Certified crop advisers, consultants, farmers, agribusiness professionals and students will learn more about nutrient management, soil and water conservation, pest Read More
NutriSphere-N Application
Crop InputsVerdesian: NutriSphere-N Making A Water Quality Difference In Midwest
November 18, 2016
Farmers sitting on the largest aquifer in the United States have learned a thing or two about managing nitrogen (N) Read More
FertilizerThe Fertilizer Institute Issues Statement On The U.S. Elections
November 10, 2016
The Fertilizer Institute (TFI) President Chris Jahn has issued the following statement on the results of the 2016 elections: “TFI Read More
Fertilizer Storage
FertilizerThe Fertilizer Institute Hires New Director Of Agronomy
November 4, 2016
The Fertilizer Institute (TFI) has hired Dr. Sally Flis as its director of agronomy, a new position created to support Read More
Trending Articles
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Precision AgTrimble Debuts End-to-End FMIS Platform
November 28, 2016
October’s inaugural PrecisionAg Vision Conference left this author with many thoughts and things to ponder in the coming months. Probably Read More
CHS Primeland
CropLife 100The 2016 CropLife 100 Report: Reviewing The Many Bulls And Bears Impacting This Year’s Marketplace
November 28, 2016
For virtually all of 2016, the nation was wholly focused on the big Presidential election. Some folks aligned themselves with Read More
Monsanto sign
Crop InputsMissouri Governor Meets With Bayer CEO To Discuss Monsanto Merger
November 21, 2016
Missouri Gov. Jay Nixon visited Bayer AG global headquarters in Leverkusen, Germany, on November 18 to discuss the proposed Bayer-Monsanto Read More
STS16 2017
SprayersHagie Manufacturing Releases 2017 STS16 Sprayer To Market
November 16, 2016
Hagie Manufacturing LLC’s largest full season applicator is now available with enhancements for the 2017 model year. Hagie is officially Read More
Wilco
CropLife 100Valley Agronomics, Wilco-Winfield To Form New Agronomy Joint Venture
November 11, 2016
Valley Agronomics LLC, headquartered in Rupert, ID, is a joint venture between Valley Wide Cooperative and Winfield Solutions, LLC. Wilco-Winfield, Read More
Latest News
HerbicidesHerbicides 2017: New Cropping Systems Set For Debut
December 7, 2016
Herbicide-resistant weed are inching ever-closer to a potentially frightening saturation point here in the U.S. Heading into 2016, USDA planting Read More
CropLife 100Wilbur-Ellis Acquires Michigan Ag Retailer
December 7, 2016
Wilbur-Ellis’ Agribusiness, a recognized leader in precision agriculture technology and the distribution and marketing of plant protection, seed and nutritional Read More
Fertilizer storage The Andersons
CropLife 1002016 Fertilizer Report: Another Really Rough Year For A…
December 7, 2016
In many ways, the fertilizer category cannot seem to catch a break. During the early part of the 2010s decade, Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Winter wheat
HerbicidesTalinor Herbicide Approved For Wheat And Barley
December 7, 2016
Talinor herbicide from Syngenta has received federal registration from the U.S. EPA, giving wheat and barley growers a new option Read More
Forage Sorghum
UncategorizedMilestone Achievement Continues For Dow AgroSciences, A…
December 7, 2016
New and innovative forage products are on the horizon driven by continued collaboration between Dow AgroSciences, a wholly owned subsidiary Read More
Palmer pigweed seedhead in cotton
HerbicidesNew WSSA Factsheet Explores Weed Seeds And Their Longev…
December 7, 2016
Did you know some weed seeds can lie dormant in the soil for more than a century and then sprout Read More
Crop InputsARA 2016: 5 Developments Worth Monitoring Into 2017
December 6, 2016
You can pretty much set your watch to it (do people even still wear watches? I know I do…but I’m Read More
Tim McCardle, ARA Chairman
CropLife 100BRANDT COO Named ARA Chairman
December 5, 2016
BRANDT EVP and Chief Operating Officer Tim McArdle has been named chairman of the Agricultural Retailers Association (ARA) during a Read More
Crop InputsWilbur-Ellis Receives ResponsibleAg Certification At Mo…
December 5, 2016
Wilbur-Ellis Co., a recognized leader in precision agriculture technology and the distribution of crop protection products, announces the ResponsibleAg certification Read More
Young Corn Closeup
Eric SfiligojThe Read On 2017 For Agricultural Fortunes Is Anybody’s…
December 5, 2016
As I (and others) have written in recent months, the nation has just experienced one of the most offbeat election Read More
Acceleron B-300 seed coating
Crop InputsThe BioAg Alliance Launches New Yield-Boosting Microbia…
December 5, 2016
As part of their commitment to develop and commercialize innovative microbial solutions for farmers through The BioAg Alliance, Monsanto Co. Read More
ManagementCorn and soy planting update; Takeaways from Climate Co…
December 2, 2016
AgriBusiness Global Editor Dave Frabotta Joins Paul Schrimpf for a discussion of global corn and soybean planting trends, and a Read More
Radish cover crop taproot
Crop InputsSoil Health Institute, Datu Research Receive Grant To E…
December 1, 2016
The Soil Health Institute (SHI) and Datu Research have announced a $626,000 grant from the Walton Family Foundation to quantify the Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
ManagementAg Industry Comes Together To Address Climate Change
December 1, 2016
Addressing climate change — and more specifically, decreasing greenhouse gas emissions from agriculture — can only be achieved through collective Read More
Young soybean field
HerbicidesLiquid Formulation Valor EZ Herbicide Available For 201…
December 1, 2016
Valent U.S.A. Corp. has released Valor EZ; a liquid formulation of the company’s leading herbicide, Valor. Named Valor EZ Herbicide Read More
Key Cooperative Marcus Construction Steel Building
ManagementThe Value Of Cooperatives In Modern Agriculture
December 1, 2016
Editor’s Note: Jaxon Mullinnix of  Lone Tree, IA, was recently named the Iowa state winner of the 2017 GROWMARK essay Read More