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
Top 100 Articles
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Match Made In Deviation
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More
Winter Wheat
CropLife 100South Dakota Co-op Member Owners Vote No On Unification
June 26, 2015
The Boards of Directors for North Central Farmers Elevator (NCFE) and Wheat Growers (WG) have announced that member-owners have voted Read More
CropLife 100The Andersons Acquires South Dakota Plant Nutrient Manufacturer Kay-Flo
May 20, 2015
The Andersons, Inc., ranked No. 22 on the CropLife 100, has purchased Kay Flo Industries of North Sioux City, SD. “This Read More
CropLife 100AgGateway’s Barcoding Initiative Progressing Nicely
May 8, 2015
According to legend (or Wikipedia), the first step towards modern bar codes came back in 1948, when Bernard Silver, a Read More
CropLife 100Pinnacle Agriculture Acquires Minnesota Retailer
April 14, 2015
Pinnacle Agriculture Holdings, LLC, ranked No. 6 on the CropLife 100,  has successfully acquired Liebl Ag, LLC in Ada, MN.  Read More
CropLife 100CHS, Aurora Cooperative Complete Fertilizer Storage, Grain Shuttle Loading Facility
April 13, 2015
CHS Inc., the nation’s leading cooperative and ranked No. 5 on the CropLife 100, and Aurora Cooperative (ranked No. 21) Read More
Latest News
Measuring Bulk Tanks
ManagementBulk Pesticide Compliance: Top 10 Areas Of Improvement …
July 1, 2015
  In honor of the 33-year run of David Letterman’s Late Show, the American Agronomic Stewardship Alliance (AASA) is happy Read More
Industry NewsArysta North America Hires Midwest Sales Manager
July 1, 2015
Arysta LifeScience North America recently announced the hiring of Brian Battles as the Senior Technical Sales Manager for the Midwest Read More
Farmer on tablet
Eric SfiligojThe Never-Ending Battle Against Modern Agriculture
July 1, 2015
In the world of comic books, the character of Superman often refers to the fight to save the world as Read More
Retail FacilitiesBuilding Up Ag Retail
July 1, 2015
In the oftentimes unpredictable world we live in, it’s nice to know some things can be reliably countered on to Read More
Retail FacilitiesMaple River Grain And Agronomy Phases In Site Developme…
July 1, 2015
Marcus Construction helped Maple River Grain and Agronomy in Casselton, ND, with the design-build of its dry fertilizer, liquid chemical/seed Read More
Retail FacilitiesA&B Welding Builds A New Liquid Terminal Hub For Br…
July 1, 2015
To build its new hub facility, Briggs Crop Nutrients enlisted the help of A&B Welding. The result, an efficient facility Read More
Edon Farmers Co-op
Retail FacilitiesNew Marcus Facility At Edon Farmers Co-op Provides More…
July 1, 2015
Edon Farmers Co-Op in Edon, OH, needed a new facility to consolidate outdated locations. Marcus Construction was able to design Read More
Retail FacilitiesKinder Morgan Expands Its Storage With A New Dome Barre…
July 1, 2015
Kinder Morgan wanted additional covered storage at its Dakota Bulk Terminal on the Mississippi River in St. Paul, MN. With Read More
Retail FacilitiesHeartland Tank Protects Fertilizer From Extreme Cold At…
July 1, 2015
The Arthur Companies in Harvey, ND, enlisted the help of Heartland Tank Companies to develop a new liquid fertilizer facility Read More
The McGregor Co. fertilizer loadout
Retail FacilitiesThe McGregor Co. Partners With Kahler Automation To Cre…
June 30, 2015
Kahler Automation helped The McGregor Co. expand its Clarkston, WA, operation with unstaffed loadout technology that enables customers to pick Read More
Dry and Liquid Plant
Retail FacilitiesKahler Automation Helps CHS Dakota Ag Cooperative Build…
June 30, 2015
CHS Dakota Ag Cooperative in Mooreton, ND, wanted a liquid/dry blender system that could meet the needs of its customers Read More
Crop InputsLand O’Lakes, United Suppliers To Merge Crop Inpu…
June 29, 2015
Land O’Lakes, Inc. and United Suppliers, Inc. of Ames, IA, today announced their intent to merge their crop inputs businesses. Read More
FungicidesHelena To Distribute Unique Summit Agro Fungicide
June 29, 2015
RANMAN 400 SC fungicide, the only fungicide with a FRAC group 21 designation, is now part of the innovative Summit Read More
Eric SfiligojIARC Targets 2,4-D In Latest Report
June 29, 2015
The International Agency for Research on Cancer (IARC) has struck again. Earlier this year in March, this agency of the Read More
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Ma…
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More
EquipmentCase IH Launches New Precision Air 5 Series Carts
June 29, 2015
Case IH recently introduced its new Precision Air 5 series air carts, developed to get the most from every plant’s Read More
InsecticidesVestaron Biopesticide Approved In California
June 29, 2015
Vestaron Corporation, a developer of insect control products derived from naturally occurring peptides, today announced that its VST-006330-EP biopesticide has received Read More
InsecticidesValent’s Zeal SC Miticide Receives EPA Approval
June 29, 2015
Valent U.S.A. Corporation announced today that Zeal SC Miticide has been registered by EPA with a new liquid formulation that Read More