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

FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
Aerial view of the West Fertilizer explosion site
FertilizerFertilizer Companies Blame City For West, TX, Explosion
August 6, 2014
El Dorado Chemical Co. and CF Industries contend the city failed to properly train the first responders and had insufficient protocols in place to battle the April 17, 2013, blaze at West Fertilizer Co. that triggered the explosion. Read More
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

Trending Articles

CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More
EquipmentNew Holland Acquires Miller-St. Nazianz
September 3, 2014
The assets of Miller acquired as part of the transaction will become part of New Holland Agriculture, a CNH Industrial brand, building on a successful four-year partnership between the two companies. Read More
CropLife 100Pinnacle Acquires East Kansas Chemical
September 2, 2014
Ranked 82nd on the CropLife 100, East Kansas Chemical will operate as part of Pinnacle's Performance Agriculture brand. Read More
MAGIE 2014 ShowStopper
EquipmentJohn Deere Again Wins MAGIE ShowStopper Award
August 25, 2014
For the second consecutive year, John Deere was honored at the Midwest AG Industries Exposition (MAGIE) for its new R4045 sprayer. Read More
ManagementExpert To Discuss Farmland Value, Rent At Farm Science Review
August 18, 2014
While cropland values in Ohio increased in the past two years, they have remained flat in 2014, declining in some cases, according to an Ohio State University agricultural economist. Read More
EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More

Latest News

CropLife 100Pinnacle Acquires Kansas-Based Cedar Ridge Supply
September 16, 2014
Cedar Ridge Supply will operate as part of Pinnacle's Performance Agriculture brand. Read More
StewardshipSecretary Vilsack Highlights Innovative Conservation Ef…
September 15, 2014
Nearly $16 million in Conservation Innovation Grants (CIGs) will be awarded to 47 organizations to help develop cutting-edge ideas to accelerate innovation in private lands conservation. Read More
Seed/BiotechSyngenta Responds To Cargill Lawsuit
September 15, 2014
Syngenta believes that the lawsuit is without merit and strongly upholds the right of growers to have access to approved new technologies. Read More
Equipment2014 Farm Science Review Launches Mobile App
September 15, 2014
Smartphone and tablet users planning on attending the 2014 Farm Science Review can now download this year’s customized mobile application. Read More
CropLife 100Southern States Coop Grower Sets Georgia Soybean Yield …
September 15, 2014
Georgia farmer Randy Dowdy's soybeans yielded an astonishing 110.66 bushels per acre, crushing the previous record of 82 bushels-per-acre. Read More
NIMITZ Treated vs Untreated pepper plant
InsecticidesNIMITZ Nematicide Approved By EPA
September 12, 2014
NIMITZ is a novel, non-fumigant nematicide with simplified application features, user safety and an active ingredient with a unique mode of action. Read More
InsecticidesMarrone Bio Innovations Receives Patent For Chromobacte…
September 11, 2014
The patent is the first step for MBI in developing a commercially viable product to inhibit infestations of corn rootworm larvae across America and other regions. Read More
HerbicidesDow AgroSciences: Keeping The Pipeline Stocked
September 11, 2014
Dow AgroSciences is embracing product diversity to drive the company’s future. Read More
CropLife 100CHS Is Official Partner Of New St. Paul Ballpark
September 10, 2014
The new ballpark in St. Paul, MN, officially became CHS Field with Twin Cities-based CHS Inc. revealed as the naming rights partner. Read More
EquipmentHagie Honors Farming Stewardship Leaders
September 10, 2014
The Iowa Farm Environmental Leader award recognizes Iowa farmers as environmental leaders that are committed to healthy soils and improved water quality. Read More
Precision AgPlantBeat: Your Plants’ Pulse In The Palm Of Your Han…
September 10, 2014
A new agronomic monitoring and recommendation service from Phytech could rewrite the book on real-time plant health status monitoring. Read More
StewardshipCCAs Making Headway With 4R Program In Lake Erie Wester…
September 9, 2014
Certified Crop Advisers are implementing the 4R Nutrient Stewardship Certification program in Lake Erie's Western Basin to improve water quality. Read More
MicronutrientsMicronutrients Going Macro
September 9, 2014
Between 2014’s fantastic growing conditions and a heightened awareness on plant nutrition, the major players in micronutrients are gearing up for another big year. Read More
Crop InputsFMC Announces Cheminova Takeover
September 8, 2014
FMC Corporation today announced that it has signed a definitive agreement to acquire Cheminova, a wholly owned subsidiary of Auriga Industries. Read More
HerbicidesValent’s Fierce XLT Herbicide Receives EPA Approv…
September 8, 2014
Valent U.S.A. Corp. announced today that Fierce XLT Soybean Herbicide is now federally registered for preemergence weed control in soybeans Read More
Eric SfiligojIndustry Consolidation Set To Increase Going Forward
September 8, 2014
As the agricultural marketplace moves into fall, one observer predicts the pace of consolidation will grow at all levels. Read More
LegislationCropLife America Leaders Address Regulatory Landscape, …
September 8, 2014
As CropLife America enters its 81st year, the organization’s leaders have seen another period of rapid and visible policy and public issue activity. Read More
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More