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

Truck dumping dry fertilizer
FertilizerFertilizer Logistics Q&A: Southern States’ Joe Wlodkoski
May 2, 2016
Joe Wlodkoski, Director of Agronomy Procurement, Fertilizer, Southern States Cooperative, is a 40-plus year fertilizer industry veteran. He is quite Read More
West Central Dome structure
FertilizerFertilizer Logistics 2016: All Clear, So Far
May 1, 2016
After a relatively hairy early start to the spring fertilizer movement season with flooding in Louisiana and St. Louis, things Read More
Young corn plants in soil
FertilizerNutrients For Life Foundation Launches New Environmental Science Supplement For High School Teachers
April 13, 2016
The Nutrients for Life Foundation released the latest resource for high school teachers entitled Feeding the World & Protecting the Read More
Flooded corn in Indiana
FertilizerLa Niña Or El Niño: Both Affect Growers’ Nitrogen Investments
April 12, 2016
Submitted by Verdesian Life Sciences As growers prepare for planting, they will be anxiously checking the weather forecast. Midwest growers Read More
Trending Articles
Eric SfiligojReasons For Hope In Commodity Prices
May 2, 2016
For many months now, the doomsayers have ruled the day in agriculture. Too much supply with too little demand would Read More
Eric SfiligojMissing The Family Ties In Agriculture
April 25, 2016
By its nature, the agriculture market is cyclical. Up and down cycles come and go with a regular pattern. For Read More
HerbicidesHerbicide Resistance In Waterhemp Continues To Grow
April 22, 2016
Twenty-five years ago, waterhemp was virtually unknown to Illinois farmers. Today, the broadleaf weed blankets corn and soybean fields across Read More
Eric SfiligojBiotech Corn Drop More Economics Vs. Consumer Rejection
April 18, 2016
Since their introduction into the agricultural marketplace, biotech crops has steadily grown in acreage in the countries of the world Read More
Crop InputsBayer: 5 Reasons We Disagree With Maryland Neonic Ban
April 12, 2016
We’re disappointed that the Maryland legislature chose not to stand up for sound science and the rights of Maryland’s homeowners Read More
Corn
OpinionChallenging Global Economic Conditions Putting More Heat On U.S. Ag Retailers
April 7, 2016
There it is. That vague, slightly sickening feeling in the pit of my stomach. Things are getting weird out there. Read More
Latest News
Patriot 4440 Sprayer close up
ManagementFlashing Back And Moving Forward On Spray Drift
May 3, 2016
The potential for pesticide drift remains an unavoidable feature of modern agriculture. Here, too, history repeats itself. “When Roundup debuted, Read More
Giant Ragweed
HerbicidesSurvey Provides Insights On Giant Ragweed In The Corn B…
May 2, 2016
A new survey published in the journal Weed Science offers insights into the distribution and management of giant ragweed, a Read More
Truck dumping dry fertilizer
FertilizerFertilizer Logistics Q&A: Southern States’ Joe Wlod…
May 2, 2016
Joe Wlodkoski, Director of Agronomy Procurement, Fertilizer, Southern States Cooperative, is a 40-plus year fertilizer industry veteran. He is quite Read More
Eric SfiligojReasons For Hope In Commodity Prices
May 2, 2016
For many months now, the doomsayers have ruled the day in agriculture. Too much supply with too little demand would Read More
West Central Dome structure
FertilizerFertilizer Logistics 2016: All Clear, So Far
May 1, 2016
After a relatively hairy early start to the spring fertilizer movement season with flooding in Louisiana and St. Louis, things Read More
BAICOR
CropLife 100BRANDT Acquires Utah Specialty Fertilizer Company
April 28, 2016
BRANDT, a leading agriculture retailer and manufacturer of specialty ag products, has acquired a majority interest in BAICOR, L.C. BAICOR, Read More
Soybean field
Industry NewsVerdesian Life Sciences Adds Vice President Of Business…
April 28, 2016
Verdesian Life Sciences has announced the addition of Marc Treurniet to the plant health and nutrition company’s management team. Treurniet Read More
ManagementBiotech Crops Developments and Millennials
April 28, 2016
Editors Eric Sfiligoj and Paul Schrimpf talk about the latest activities in biotech crops and a major shift in the Read More
Industry NewsNachurs-Alpine, Pathway Biologic Extend Marketing Agree…
April 28, 2016
Nachurs-Alpine Solutions (Marion, OH) and Pathway Biologic (Plant City, FL) announce an extension to their exclusive marketing agreement specific to Read More
MicronutrientsCharah Add Three Warehouses For SUL4R-PLUS Fertilizer
April 28, 2016
Charah, Inc., a total solutions company providing unparalleled service and innovation for the coal-fired power generation industry, announced today that Read More
Spenser Forgey, Yahama Fortix
FungicidesIndiana Farmer Wins Arysta LifeScience FORTIX Fungicide…
April 28, 2016
Arysta LifeScience North America recently presented Spenser Forgey, a grower from Young America, IN, with a new 2016 Yamaha Grizzly Read More
Corn Field
HerbicidesNew Wilbur‐Ellis Herbicide Targets Volunteer Corn
April 28, 2016
Wilbur‐Ellis Co., a recognized leader in marketing and distribution of crop protection products, as well as precision agriculture technology, has Read More
StewardshipNRCS To Help Farmers Measure Conservation Impacts On Wa…
April 27, 2016
The USDA has announced the availability of $2 million to help farmers install edge-of-field stations that monitor water quality as Read More
Planter in Iowa
EquipmentTop 10 Twitter Pics For #Plant16
April 27, 2016
Despite some wet weather in parts of the Midwest, growers and ag retailers are working feverishly to plant this year’s Read More
HerbicidesHELM AGRO Launches New HELM Sulfentrazone 4F Herbicide
April 26, 2016
HELM AGRO US, Inc. has announced the federal Section 3 registration of its new HELM Sulfentrazone 4F herbicide. Classified as a Read More
Valley Irrigation Valley 8000 series on corn
EquipmentValley Irrigation Receives Environmental Stewardship Ho…
April 26, 2016
Valley Irrigation has been recognized as a Groundwater Guardian Green Site by the Groundwater Foundation. The Groundwater Guardian Green Site Read More
Eric SfiligojMissing The Family Ties In Agriculture
April 25, 2016
By its nature, the agriculture market is cyclical. Up and down cycles come and go with a regular pattern. For Read More
HerbicidesHerbicide Resistance In Waterhemp Continues To Grow
April 22, 2016
Twenty-five years ago, waterhemp was virtually unknown to Illinois farmers. Today, the broadleaf weed blankets corn and soybean fields across Read More