An ‘N’ Perspective

Nitrogen fertilizer storage, CHS

Nitrogen fertilizers seem stuck on a price high and supply low these days, as end-users have toggled between anhydrous ammonia (NH3) and urea to gain any possible price advantage in the market. Mark Palmquist, executive vice president and chief operating officer, Ag Business, at CHS Inc., shared some reflections on the 2007 season and his outlook on 2008 in a recent interview.

Q. Give us a little background on nitrogen this year.

Nitrogen usage this spring was probably a little bit higher than people anticipated. But more importantly, demand was stronger and the supply chain didn’t do a good job of adjusting this fall, and did not ramp it up soon enough. Then there was the increase in corn acres up to 92.5 million, and great developments in wheat prices going higher.

End-users ordered late, and because nitrogen prices were high, they did not want to build up big inventory. A lot of people remembered the year prior where nitrogen prices crashed on them in the spring, so they did not want to store a lot of product. It was one of those perfect storms where you had three major events coming together that got the market behind on nitrogen.

Q. And there was no relief on the global production side?

The safety valve in the export market wasn’t there. We literally did not have vessels coming in for more than 30 days, so there was no imported supply to tap into.  It was a supply chain issue that got aggravated by demand being a little higher than what was anticipated.

Q. What’s the market like this fall?

We’ve been struggling to fill fall orders, but we hope to get a pickup in imports to help us deal with the tight urea supply. With anhydrous, I’m not sure there is a lot we can do. Production levels are pretty much maxed out at this point. And if you look at UAN, that is definitely maxed out — UAN bothers us the most, and we have been trying to find some solutions but there’s nothing in sight in the short term.

Q. How are current crop prices affecting the future outlook?

Price action between corn, beans, and wheat, if they stay where they are, would suggest that corn acreage would actually go down. So, that’s kind of stopped everybody for a moment to try and figure out how much length they want to build up in urea. We are hoping the market is going to adjust itself because we wouldn’t like to see the corn acreage come down. The price action today shows that wheat prices are almost double that of corn, so that tells you we are going to get an increase in wheat acreage. And if you look at the spread relationship between corn and beans, it says we would  also be buying bean acres.

There is still time for the market to readjust — we’re talking about the next 3 months we have got to get that price relationship readjusted to hold on to the corn acres. A lot of producers will be making their decisions by December.

Q. What else do you see, going into 2008?

From a nitrogen standpoint we  need to build up supply, and we are trying to get more of the product in position, almost pre-positioned so we can smooth out the supply chain a little bit. Part of the volatility on all crop nutrients has been made worse by a supply chain that has been very herky-jerky, so we are going to smooth that out and pull a little of the volatility out. We think that we can make some inroads on that on the nitrogen side.

We will look at importing some more urea internationally, and honestly that’s one of the positive things we see about crop nutrients coming into CHS is that we have the expertise, we have ocean vessels so we can turn that spigot on a little faster than what was done in the past.

We certainly want to go after anhydrous, so we are sitting down with a lot of our suppliers and asking if there is something that we can do in storage, pre-positioning, and prepayments so that we can get the supplies in place a little bit quicker.

On the UAN side, that is a tight situation and I am not sure what we can do to affect that over the fall and winter — that’s more than a year down the road. And we are looking at adding storage capacity so we can take shipments all year round.

Internationally, demand is going up, but as they say in commodities markets, the best cure for high prices is high prices. It’s creating demand that is raising production. The additional capacity coming in should hit us around 2010 or 2011 and should make the urea situation get more in balance. It’s getting through the next 18 months to 2 years that is really the battle.

Leave a Reply

Fertilizer Stories

FertilizerPhosphorus: Is Band Or Broadcast Application The Better Method?
February 3, 2016
Is band or broadcast application the better method when it comes to phosphorus? The answer to this question depends mostly Read More
Potash storage at Growmark
FertilizerThe Phosphate And Potash Outlook For 2016
February 2, 2016
Like other commodities, prices of the leading plant nutrient products dropped sharply in 2015. At this writing, the price of Read More
Young Corn Plants
FertilizerNutrient Considerations For Low Corn Prices
February 2, 2016
Corn prices are low and many producers are asking tough questions about their nutrient management programs. Here are some suggestions Read More
Granular urea from CF Industries urea plant in Donaldsonville, LA
FertilizerWhat’s In Store For Nitrogen In 2016
February 2, 2016
Supply is the overriding theme for the North American 2016 nitrogen outlook. In the last 12 months, global factors have Read More
Top 100 Articles
Elburn Cooperative
CropLife 100Elburn Cooperative Members Vote To Join CHS
December 28, 2015
With 81% of eligible producers voting, 94% cast an affirmative ballot for Elburn Cooperative, a diversified agricultural retailer based out Read More
West Central Cooperative, Jefferson, IA
CropLife 100Farmers Cooperative-West Central Merger Approved
December 21, 2015
The members of Farmers Cooperative Co. (FC), Ames, IA, and West Central Cooperative, Ralston, IA, have both approved the merger Read More
Wheat Growers Innovation Center, Bath, SD
CropLife 100Wheat Growers Opens Innovation Center
December 21, 2015
Wheat Growers’ commitment in providing its farmer-owners with the latest in technological advancements now has a one-of-a-kind focal point, as Read More
CropLife 100ARA Selects The Andersons As 2015 Retailer Of The Year
December 9, 2015
The Agricultural Retailers Association today named Maumee, OH-based The Andersons as its Retailer of the Year for 2015. The award Read More
CPS Washington Court House John Deere Sprayer
CropLife 100Application Equipment Report: It Is Easy Being Green For Top 100 Ag Retailers
December 5, 2015
On The Muppets television show, Kermit the Frog is famous for singing a song about the troubles he encounters in Read More
Fertilizer Bin
CropLife 100Fertilizer Sales: Another Down Year For Top 100 Ag Retailers
December 4, 2015
In pure number terms, the fertilizer category still dominates all crop inputs/services among CropLife 100 ag retailers. In 2015, for Read More
Latest News
Crop Protection Products in storage
Crop InputsNewsweek: World Is ‘Awash In Glyphosate’
February 11, 2016
The world is awash in glyphosate, the active ingredient in the herbicide Roundup, produced by Monsanto. It has now become Read More
Crop InputsEPA: Let’s Talk Imidacloprid, Bees On February 18
February 11, 2016
EPA will hold an online technical briefing on its preliminary pollinator risk assessment for imidacloprid, a neonicotinoid insecticide, on Feb. Read More
ManagementThe latest on Syngenta-ChemChina Deal
February 11, 2016
Executive Editor Paul Schrimpf invites Jackie Pucci and Dave Frabotta from sister publication AgriBusiness Global to discuss the latest developments Read More
AdjuvantsUniversity of Illinois Confirms Adjuvant’s Perfor…
February 11, 2016
An independent University of Illinois study has shown that WETCIT adjuvant, now with TransPhloem technology, provides greater herbicide uptake and Read More
Crop InputsSyngenta’s Acuron Flexi Receives EPA Approval
February 11, 2016
Growers looking to control their toughest weeds with flexibility will have access to Acuron Flexi corn herbicide from Syngenta, now Read More
EquipmentAGCO Showcases White Planters 9800VE Series Planters AT…
February 11, 2016
AGCO unveiled the new White Planters 9800VE Series planter during the 2016 National Farm Machinery Show in Louisville, KY. The Read More
EquipmentCase Unveils 2000 Series Early Riser Planter At NFMS
February 10, 2016
Case IH revealed the all-new 2000 Series Early Riser planter to media and attendees at the opening of the National Read More
Syngenta Sign
Crop InputsSyngenta: Keep Ag In Mind During Election Season
February 10, 2016
As presidential candidates stake out their 2016 election platforms and key priorities, growers and their business partners should seek opportunities Read More
Crop InputsMarrone Bio Innovations Submits New Bio-Fungicide For E…
February 9, 2016
Marrone Bio Innovations, Inc. (MBI) today announced that it has submitted a new biological fungicide (MBI-110) to EPA. The broad spectrum Read More
Crop InputsWeed Expert: Adding A Second Herbicide Not Always Easy
February 9, 2016
In my last post, I reviewed some recent research that suggests one of the best ways to delay the evolution Read More
Crop InputsGenetic Literacy Project: Farmers Need More Herbicide C…
February 9, 2016
There are two things that I think just about every weed scientist can agree on, writes Andrew Kniss for The Read More
HerbicidesWeed Expert Warns North Dakota Growers Of Coming Herbic…
February 9, 2016
Ford Baldwin painted a bleak picture of weed control at a recent workshop here exploring the future of ag production, Read More
HerbicidesWSSA Announces New, Updated Free Web Resources
February 9, 2016
Today the Weed Science Society of American (WSSA) announced that new and updated educational materials for both weed scientists and Read More
Soybean field
FungicidesFour Arysta Fungicide Formulations Given FIFRA Approval…
February 8, 2016
Arysta LifeScience North America recently announced the issuance of Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 2(ee) Recommendations for Read More
FungicidesAgri-Fos Systemic Fungicide Plus Receives EPA Registrat…
February 8, 2016
Vivid Life Sciences has announced the EPA registration of Agri-Fos Systemic Fungicide Plus, a highly concentrated active ingredient phosphite fungicide, Read More
Crop InputsBayer Contests EPA’s Decision On Valuable Insecticide F…
February 5, 2016
Crop Science, a division of Bayer, has announced it has refused a request by the Environmental Protection Agency (EPA) to Read More
Wheat Field North Dakota
Seed/BiotechSyngenta Wins Seed Fraud Suit Against South Dakota Grow…
February 5, 2016
Syngenta has obtained a $25,000 settlement from Paul and John Mayclin, Mayclin Farms, Plankinton, SD, in response to their Plant Read More
ManagementOABA Annual Conference Wraps Up In Columbus
February 5, 2016
More than 300 Ohio AgriBusiness Association (OABA) members and industry professionals were on hand to engage in collaborative learning and Read More