Fall Fertilizer Outlook: A Heated Debate

Now that the calendar has turned to September, many ag retailers are gearing up for the usually busy fall fertilizer application season. However, because of the extended drought that gripped much of the Midwest during the summer, there are a fair number of applicators that fear the 2012 fall season will be a non-starter for them.

To appreciate just how deeply this sense of apprehension about 2012 is running, consider this tale from Tim McArdle, COO/vice president for Brandt Consolidated Inc., Springfield, IL. This past July, McArdle was in attendance at the Southwestern Fertilizer Conference, an annual gathering of top fertilizer suppliers and distributors. Normally, this event is dominated by discussion of fertilizer market trends and the finalizing of distribution deals.

This year, however, most of the talk concerned the weather.

“I’m sitting in the San Antonio airport to return from the meeting,” wrote McArdle in a mid-July email. “The drought and its impact was the major discussion point here.”

But will the prospects for 2012 be that bad? Before attempting to answer this question, a brief review of how events have played out during 2012 is in order.

At the beginning of the year, grower-customers were still feeling pretty good. According to USDA, corn acreage was expected to top 96.4 million acres — the largest seeded area figure the U.S. had seen in 75 years. Projections for broad fertilizer usage was also high. An early, dry spring helped growers get virtually all of their seed planted by the end of May, furthering rising hopes for a good 2012 corn season.

How Dry We Are

Unfortunately, the dry spring never really came to an end. Then, a series of slow moving or stationary high pressure systems kept much of the nation’s midsection baking throughout the key corn growing months of June and July. By early August, USDA had designated 1,585 counties in 32 states as disaster areas because of the lack of rainfall. Particularly hard hit were key corn producing states such as Illinois, Iowa and Indiana. But nationwide, USDA rated approximately half of the corn crop as very poor to poor.

From the field, the news supported this analysis. “The crops in Central Illinois are hurt badly,” says McArdle. “The average yield will, at best, be one-half, with many fields in the 0- to 50-bushel range.”

As a result of this, USDA has slashed its harvest projections for corn to 86.4 million acres with yields off 23% from 2011 to 128 bushels per acre.

Still, there are some areas where the drought’s impact appears to be less severe. For example, Ohio corn growers have fared much better than their counterparts in neighboring states. “The full impact [of the drought] is very difficult to predict as some parts of our trade area have experienced severe crop loss while others have had much less,” says Doug Busdeker, senior manager, Northern farm centers for The Andersons Inc., Maumee, OH.

But even with significant crop losses caused of the drought, adds Busdeker, many grower-customers should be protected from complete financial disaster because of their crop insurance policies. However, as Brandt’s McArdle points out, fall cash flow for some growers could be an issue “since crop insurance payments will not come until later.”

The Fall Outlook

So how will this chain of extraordinary events impact the outlook for fall fertilizer? “Well, I think that’s the big question,” says Bill Coen, vice president, plant foods/transportation for MFA Inc., Columbia, MO. “I think everybody’s wondering how the drought will affect fertilization and purchasing habits going into the fall.”

And? “We don’t know the answer to that just yet,” says Coen. “Our guess is, from some of the conversations we’ve had with some of our customers that they’ll kind of wait and see what crops they have, process their insurance claims and then kind of make a decision on what they will do for fertility.”

However, other ag retailers are a bit more pessimistic about the outlook for fall 2012, especially for crop nutrients such as potash (with corn accounting for approximately 45% of annual U.S. usage, according to sources). “Our business will see a reduction of fertilizer sales this fall — up to has much as a 50% reduction,” says Brandt’s McArdle. “Nitrogen should be okay, but it still requires rain before it can be applied.”

Still, ag retailers aren’t completely trying to get a read on fall 2012 without the ability to rely on some historical assistance. In many quarters, market watchers have compared the Drought of 2012 to the last major drought that gripped U.S. agriculture back in 1988. According to USDA statistics, U.S. corn yields in 1988 were off 30% from the previous year to 84.6 bushels per acre — very similar to the 23% loss projected for the 2012 crop.

Despite this drop, however (or because of it), U.S. corn growers moved forward with their 1989 planting intentions with a sense of normalcy — at least when it came to nitrogen fertilizers. According to USDA statistics, corn growers used just shy of 4.5 million tons of nitrogen products during the drought year of 1988. In 1989, they used more than 4.6 million tons of nitrogen fertilizer, an increase of 2.3%.

Looking ahead to fall 2012 and spring 2013, it makes sense that a similar pattern will emerge for nitrogen-based fertilizers, say market watchers, pointing out that corn’s response to nitrogen is usually less during a drier year. “The bottom line is there will be big corn acres again next year and these guys will not shortchange a crop,” says MFA’s Coen. “They want to maximize their yields, so they won’t cut fertilizer to the point that it’s detrimental.”

However, the historical tale of 1988-89 is a bit less positive for the other two macronutrients, phosphate and potash. Perhaps possessing a mindset to “mine” their soils, U.S. corn growers applied just short of 1.8 million tons of phosphate in 1989, down 3.1% from 1988’s total. Potash application took a similar hit, down from 2.5 million tons in 1988 to 2.2 million tons in 1989.

So if history repeats itself in 2012, nitrogen fertilizer applications should trend slightly higher during this year’s fall season while phosphate and potash application would suffer some setbacks. But some ag retailers don’t think this will happen, especially given that plant roots need to grow where phosphate and potash are located in the soil and 2012’s severely dry summer will have likely moved these nutrients further down into the ground.

“They’re just smarter than that,” says Coen about his grower-customers. “They’re good operators and they watch their fertility, so I’m hopeful that we’ll have some good movement in the fall. I don’t think fertilizer will be cut back as much as people think it will be.”

Part of the reason for this optimism for 2012 could relate back to good-old-fashioned money. Back in 1988, the crop losses translated not only into lower yields but fertilizer prices as well. According to USDA statistics, nitrogen fertilizer prices dropped an average of 6% per ton between October 1988 and October 1989. Likewise, the price for potash per ton fell 2.6% while phosphate prices dipped 9.5%.

At the start of the year, fertilizer market analysts were predicting double-digit price increases for the three macronutrients for the 2012 season, buoyed by robust commodity prices and grower income. Nitrogen fertilizers were expected to be approximately 20% on average, with phosphate and potash both increasing in price by 38% apiece. Chances are, say market insiders, these kinds of across-the-board fertilizer increases might not come to pass.

Barge Trouble

Then again, fertilizer prices could end up higher this fall. However, the culprit won’t be tied to all-time record highs for commodity prices or higher planting intentions for spring 2013. The problem, says Coen, could be transportation.

“I think the bigger issue this fall is going to be our river system and getting products moved where we need them in a timely fashion — especially if this crop is early, which it looks like it will be,” he says. “I think we may see fertilizer movement start a little early, but the river system is such that we’ve got a lot of ports that cannot unload barges right now.”

The facts support this assessment. According to the U.S. Army Corps of Engineers, the Drought of 2012 has reduced water levels on important transport routes such as the Mississippi River that nine barges have run aground since the beginning of July. Every 1-inch loss of water decreases the carrying capacity of a barge by 17 tons of cargo, says the American Waterways Operators.

In essence, this reduces the number of barges that can be moved in tandem on the river by 10 or so, say experts, and the carrying loads from 2,200 tons per barge to 1,600 tons per barge.

“I think we can still get barges up the river, but there are a lot of docks that are too low for barges to be unloaded,” says Coen. He adds that fewer barges carrying smaller loads means suppliers will need to have more shipments made to equal their delivery order totals, which could significantly increase transport costs.

While questions still remain about how fall fertilizer applications will pan out in 2012, ag retailers say their grower-customers remain relatively positive in their outlooks for the future.

“Where the drought was most severe, growers will likely be more cautious, but will still prepare for next year’s crop,” says The Andersons’ Busdeker. “Considering the demand for corn overall, we expect the season to still be reasonably good.”

Brandt’s McArdle agrees. “We corn prices where they are, we are optimistic about 2013,” he says.

Topics:

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

CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
CropLife 100BRANDT, Verdesian Ink Distribution Agreement
December 9, 2014
The agreement grants BRANDT the exclusive right to sell and market Verdesian’s patented Steric chemistry in the Turf and Ornamental and eastern U.S. ag markets under the BRANDT Reaction product line name. Read More
CropLife 100CropLife 100: The Colors Of Custom Application
December 5, 2014
Although many color spray rigs are in the yards of the nation’s top ag retailers, the majority of them still come in only a few shades. Read More
CropLife 100Pinnacle Invests In Meridian Agriculture Distribution
December 4, 2014
Meridian will provide retailers with supplier-branded products and numerous opportunities to differentiate themselves from their competitors. Read More
CropLife 100CropLife 100: Entering A New Seed Era
December 4, 2014
The seed category has been re-vitalized during the past few years, and more good news (and varieties) are headed the industry’s way in 2015. Read More
CropLife 100CropLife 100: The Depressed State Of Fertilizer
December 3, 2014
Following downright giddy growth earlier this decade, fertilizer sales have fallen back down to earth the past two years. Read More

Latest News

Seed/BiotechKaren Arthur Joins AgriThority As Seed Treatment Produc…
December 19, 2014
Prior to joining AgriThority, Arthur directed research and development programs, overseeing laboratory and field research, to build the Valent U.S.A. seed treatment portfolio. Read More
EquipmentJohn Deere To Sell Crop Insurance Business
December 19, 2014
Deere & Co. has reached a definitive agreement to sell its crop insurance business, subject to regulatory approval, to Farmers Mutual Hail Insurance Co. of Iowa. Read More
Crop InputsNufarm Fills Regulatory VP Position
December 18, 2014
Nufarm announced today that Rob Schwehr has been promoted to the position of Vice President of Innovation & Regulatory Affairs for Nufarm Americas. Read More
Seed/BiotechReport: China Approves Viptera Corn, U.S. Officials Awa…
December 17, 2014
Chinese authorities have informed some agriculture industry officials the government has approved U.S. imports of a type of genetically modified corn developed by Syngenta. Read More
FertilizerMonty’s Plant Food Brings In New Sales Rep
December 16, 2014
Monty's Plant Food Company has hired Warren Kearns as its newest Sales Representative for the South Carolina area. Read More
EquipmentHagie Wins 2014 CropLife IRON Product Of The Year Award
December 15, 2014
The self-propelled sprayer maker has a hit on its hands with the new STS Series model. Read More
Syngenta
Seed/BiotechSyngenta Sees China Approving Contentious GMO Corn Soon
December 15, 2014
Syngenta will make an announcement when it receives official documentation from China that Agrisure Viptera corn, known as MIR 162, has been cleared for import. Read More
Crop InputsVerdesian Life Sciences Names Vice President Of Communi…
December 15, 2014
Amy Bugg will oversee the execution of all promotional strategies for the corporate brand and the complete product portfolio. Read More
StewardshipFarmers, Retailers Attend 4R Certification 4U Workshop
December 15, 2014
More than 160 farmers and ag retailer attended the “4R Certification 4U” workshop December 12 to learn more about the 4Rs of nutrient stewardship, water quality research in the area and cost-sharing opportunities. Read More
Matt Hopkins10 Best New Agriculture Apps For 2015
December 15, 2014
These new agriculture apps are certain to help ag professionals do their jobs more efficiently in 2015 and beyond. Read More
ManagementARA Learnings, Retail Buying Intentions: Welcome To Cro…
December 12, 2014
This informal video program puts news and events effecting retailers into context, and features Editors Paul Schrimpf and Eric Sfiligoj. Read More
Seed/BiotechMonsanto Herbicide-Tolerant Technology Closer To Commer…
December 12, 2014
The final EIS moves Monsanto one step closer to the introduction of Bollgard II XtendFlex cotton and Roundup Ready 2 Xtend soybeans, paving the way to provide access to dicamba-tolerant soybeans and cotton. Read More
Seed/BiotechUSDA Issues Final Environmental Impact Statement On Her…
December 12, 2014
The USDA Animal and Plant Health Inspection Service (APHIS) is issuing a final environmental impact statement on varieties of cotton and soybeans that have been genetically engineered for resistance to several herbicides, including the one known as dicamba. Read More
CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
LegislationARA Applauds CFATS Passage Prior To Holiday Adjournment
December 11, 2014
The streamlined bill provides a four-year authorization of the CFATS program and guidance to DHS on key issues of chemical facility security Read More
Seed/BiotechBayer CropScience’s ILeVO Approved By EPA
December 11, 2014
EPA has approved ILeVO, the only seed treatment that protects the root system against infections caused by the Sudden Death Syndrome fungus and has activity against dangerous nematodes. Read More
Biologicals in Emerging Markets Map.
Crop InputsBiocontrols Could Quadruple By 2025; Will Regulators Pl…
December 11, 2014
The European experience with GMOs offers caution — and a promise — for biologicals. Read More
Crop InputsBASF Donates $75,000 To Feeding America
December 10, 2014
The donation will support Feeding America’s National Produce Program, an initiative that helps with planning, transportation and logistics to ensure fresh produce deliveries to the 200 member food banks around the country. Read More