A Perilous Descent

In CropLife magazine’s January 2008 outlook issue, we compared the fertilizer marketplace to a mountain, pointing out that the industry was poised for a gradual descent after reaching the summit fueled by increased corn plantings during 2007. By coincidence, a speaker at one of the fall trade shows made a similar comparison regarding fertilizer’s fortunes moving forward.

“As you may know, many people climb Mount Everest each year,” said Joe Prokopanko, president and CEO for The Mosaic Co., speaking at the 2008 Agricultural Retailers Association meeting. “While some are hurt on the way up the mountain, many more are injured while coming back down.”

Today, ag retailers can largely appreciate this imagery. Following a spectacular sales performance in 2007 and an equally impressive one through the first nine months of 2008, fertilizer demand and prices have come tumbling down the mountain. This has retailers — many of whom stocked up fertilizer early on to make certain to meet expected demand — reaching for stomach medicine while hoping for some kind of recovery before the spring fertility season rolls around.

“What keeps me up at night these days?” asked Hov Tinsman III, president at Twin State Inc., Davenport, IA, in an e-mail to CropLife. “How and when my current fertilizer inventory is going to fall in value. Hopefully, not until after I apply it.”

Wendell Stratton, owner for Stratton Seed Co., Stuttgart, AR, agreed. “This is an easy one,” said Stratton. “Not losing money on the high-priced fertilizer inventory we have in-house.”

To appreciate just how quickly some fertilizer prices have dropped, consider sulfur. According to Prokopanko, sulfur was selling for $800 per ton during the summer months of 2008. By early December, it had plummeted to $65 per ton, a whopping 92% drop. Even worse, he added, several market observers were expecting the price would be as low as $50 per ton by end of 2008.

“The net result of all this market instability is that no one is buying and distributors are holding all of their inventories,” said Prokopanko.

Reviewing The Macronutrients

Nitrogen-based fertilizers have gone through similar price declines. For instance, urea was selling for $760 per ton in August 2008; today it can be had for approximately $250 per ton. Likewise, anhydrous ammonia dropped from a high of more than $1,000 per ton during the summer to $530 per ton by the end of the year. As a consequence of these price declines, Doug Stone, senior vice president of sales and marketing for Terra Industries, Inc., was predicting that nitrogen-based fertilizer consumption would drop in 2009, from 21.7 million tons in 2007/08 to 20.8 million tons. For the record, he added that agriculture tends to consume an average of 12.1 million tons of this total. Furthermore, global nitrogen-based fertilizer producers are cutting back on production, temporarily closing plants or running a reduced number of production lines as a result.

“This will likely mean projected tight demand/supply balances for spring 2009, which could cause prices to rebound some,” said Stone, speaking at the Fertilizer Outlook and Technology Conference in early November. “However, the price ride is still ongoing with more loop-de-loops ahead.”

For phosphate, the path down the mountain has been treacherous as well. According to industry insiders, di-ammonium phosphate (DAP) prices were at $1,200 per ton during the summer months. Today, they are down more than 50% to $550 per ton. This has effectively caused phosphate production to grind to a halt. For example, in November, PotashCorp announced production cuts at its White Springs, FL, site. Likewise, Mosaic reported that its phosphate sales volume for its fiscal second quarter was down 38% from first quarter levels, to 1.3 million metric tons.

The potash situation is the same. According to Jeff Holzman, manager of market research for PotashCorp, producers are cutting back on their output levels in an attempt to draw down supplies and stabilize prices. “There are source deferrals of packages in the fourth quarter of 2008 and into the first quarter of 2009,” said Holzman. “Shipments will be down around 3% for the year. Also, in 2009, we can expect no growth or some modest growth to occur in the market.”

The Chicken Little Syndrome

Given all these facts, Mosaic’s Prokopanko asked if 2009 would be the year that the fertilizer industry finally suffers from the long predicted “Chicken Little” effect, with suppliers unable (or unwilling) to meet grower-customer crop nutrient demands, which will reduce crop yields significantly. “Will this be the year when the sky really falls?” he asked.

Ultimately, however, he doesn’t think things will get this bad. Based upon global population projections and the crops needed to feed this growing populace, Prokopanko expects crop nutrient demand to grow from 170 million tons today to 230 million tons by 2020. “The long-term outlook for global agriculture looks rock solid to us,” he concluded. “Although the current market volatility provides serious questions in the near term, we still have as many blessings in this industry as we have challenges.”

Other fertilizer industry watchers agree with this assessment. According to Andy Jung, research manager, phosphate for CRU International, world grain stocks are at historic lows. “Right now, the global grain carryover is 11 weeks,” said Jung. “In 2002, this total stood at 13 weeks. That means we are only one big disaster away from wiping out this amount completely.”

In light of this, Rich Pottorff, chief economist at Doane Advisory Services, said the world will need more corn acreage in 2009 to keep pace with global demand, particularly from U.S. growers. For this reason, he is projecting that growers will plant 89 million acres of corn in 2009, up slightly from 86 million acres in 2008. “We really need more corn acres than this, but the economics have to be there for that to happen, which they are not right now,” said Pottorff. “We have to add 26 million metric tons of food annually to feed the 80 million more people being born each year.”

Consequently, this increased corn acreage should help boost fertilizer demand during 2009. Demand for ethanol should help. Ethanol production in 2009 could require up to 4.8 million bushels of corn, despite waning support. “Even if biofuels support collapsed completely, nitrogen-based fertilizer demand would only decrease by 2%,” said Terra’s Stone.

Leave a Reply

Fertilizer Stories

FertilizerGypsum Added To List Of Conservation Practices
July 28, 2016
Crop farmers in a growing number of states may be eligible for financial assistance from the USDA’s Natural Resources Conservation Read More
Storage Tanks at Nachurs
Crop InputsNACHURS Joins Field to Market
July 27, 2016
NACHURS announced today that it has joined Field to Market: The Alliance for Sustainable Agriculture, a leading multi-stakeholder initiative working Read More
Illinois Researchers
FertilizerMeasure Of Age In Soil Nitrogen Could Help Precision Agriculture
July 26, 2016
What’s good for crops is not always good for the environment. Nitrogen, a key nutrient for plants, can cause problems Read More
Corn Field
FertilizerPhosphorus: Complex, Inefficient, Essential
July 12, 2016
Submitted by Verdesian Life Sciences Managing phosphorous for optimum plant uptake and increased yield potential is no easy task. “Because of Read More
Trending Articles
Southeast Farmers Coop - Finished Building
Retail FacilitiesNew Stueve Facilities Offer Ag Retailers Speed, Accuracy
July 9, 2016
Leading the industry in planning and constructing dry fertilizer storage and chemical warehouse solutions, Stueve Construction helped three ag retailers Read More
Heritage Cooperative
Retail FacilitiesKahler Automation Designs State-Of-The-Art Facility For Heritage Cooperative
July 4, 2016
Heritage Cooperative in Marysville, OH, needed an efficient liquid, dry and grain facility to serve the many needs of their Read More
The Andersons Waterloo
ManagementFirst Indiana Facility Certified Under 4R Nutrient Stewardship Certification Program
June 27, 2016
The 4R Nutrient Stewardship Certification Program has announced that The Andersons, Inc.’s Waterloo, IN, facility has been added to its Read More
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To Explore IT Solutions
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
Monsanto Luling Plant
Eric SfiligojWhat’s Next For Monsanto?
May 31, 2016
For the folks at Monsanto’s headquarters in St. Louis, MO, it has been an eventful few weeks. Back on May Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Latest News
FertilizerGypsum Added To List Of Conservation Practices
July 28, 2016
Crop farmers in a growing number of states may be eligible for financial assistance from the USDA’s Natural Resources Conservation Read More
Management2016 CTIC Cover Crop Survey: 33% Report ROI From Cover …
July 28, 2016
Insight from 2,020 farmers from across the country reflected enthusiasm for cover crops and—for the fourth year in a row—found Read More
Palmer pigweed seedhead in cotton
HerbicidesStudy: Fall Weed Controls Can Make Significant Impact O…
July 28, 2016
An article published in the latest issue of the journal Weed Science shows that adopting harvest-time and post-harvest weed controls Read More
InsecticidesSyngenta: Beware Of Early Stinkbug Threat To Soybeans
July 28, 2016
With the record warm temperatures this past winter and confirmations from early entomologist reports, Syngenta encourages growers to monitor stinkbug Read More
Peanut field
Crop InputsVerdesian Introduces New Inoculant For Peanuts
July 28, 2016
As planning begins for the next growing season, Verdesian Life Sciences adds Primo Power CL, a new liquid inoculant, to Read More
Soil Young Corn
Crop InputsSmithsonian: 5 Things to Know About New GMO Labeling Bi…
July 27, 2016
On July 14, the House of Representatives passed a bill requiring large food companies to label products containing genetically modified Read More
Palmer pigweed in soybean stubble
HerbicidesSpecial Issue Of Weed Science Explores Human Aspects Of…
July 27, 2016
Weeds that evolve resistance to herbicides are a serious threat to global agricultural production. In this Special Issue of Weed Science, Read More
CHS Primeland
CropLife 100CHS Businesses In Washington, Idaho Combining For Great…
July 27, 2016
As full-service ag retailers, CHS Primeland and CHS Farmers Co-op collectively serve farmers and other customers in 15 counties in Read More
Storage Tanks at Nachurs
Crop InputsNACHURS Joins Field to Market
July 27, 2016
NACHURS announced today that it has joined Field to Market: The Alliance for Sustainable Agriculture, a leading multi-stakeholder initiative working Read More
Illinois Researchers
FertilizerMeasure Of Age In Soil Nitrogen Could Help Precision Ag…
July 26, 2016
What’s good for crops is not always good for the environment. Nitrogen, a key nutrient for plants, can cause problems Read More
Kochia
Crop InputsNufarm Launches New Herbicide for Resistant Kochia
July 25, 2016
Nufarm introduces Scorch herbicide for U.S. farmers and ranchers combating a broad range of troublesome broadleaf weeds. A unique premix Read More
ManagementNew Rabobank Report Calls for Farmer ROI Focus
July 25, 2016
As U.S. row crop farmers brace themselves for a third year of negative margins, Rabobank believes farmers must lower the Read More
Syngenta Sign
Crop InputsBloomberg: Syngenta-Chem China Deal on Track for Regula…
July 25, 2016
Syngenta AG, which has agreed to be taken over by China National Chemical Corp. for $43 billion, said talks with Read More
ManagementGROWMARK Meeting Visit, Company Takeover Updates, and R…
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
Crop InputsMonsanto: EU Approves Roundup Ready 2 Xtend Imports
July 22, 2016
Monsanto Co. announced today that the European Commission has granted import approval for Roundup Ready 2 Xtend soybeans. This milestone Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSyngenta Announces Alfalfa Seed Split Off
July 22, 2016
On September 1, 2016, Syngenta will transfer sales and distribution of alfalfa seed to the NEXGROW branded business that is Read More
Dow DuPont
Crop InputsDuPont, Dow Shareholders Approve Merger
July 21, 2016
DuPont and The Dow Chemical Company announced that, at their respective special meetings of stockholders held today, stockholders of both Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Oth…
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More