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

Crop InputsDuPont Pioneer: Corn Belt P and K Levels Lagging
August 24, 2016
A new DuPont Pioneer study conducted across 12 Corn Belt states demonstrates that growers may be leaving profit potential in Read More
Tissue testing
FertilizerMosaic: 6 Tips For Better Crop Nutrition In Corn
August 16, 2016
Late in the crop season is a good time to assess visual nutrient deficiencies and ensure early- and mid-season deficiencies Read More
Soil
FertilizerSoil Health Experts Gain Ground On Standardized Measurements
August 11, 2016
Soil health experts from across North America plan to integrate more research projects to provide agricultural producers and policy makers Read More
Fertilizer5 Steps For Identifying Nutrient Deficiencies This Summer
August 8, 2016
As the summer growing season unfolds, the quest for ways to protect emerging crops is top of mind for many Read More
Trending Articles
Key Cooperative Marcus Construction Steel Building
Retail FacilitiesMarcus Construction Builds High-Speed Agronomy Center For Key Cooperative
July 7, 2016
Key Cooperative in Grinnell, IA, wanted a state-of-the-art Agronomy Center to better serve its customers. Marcus Construction delivered exactly that. Read More
Heritage Cooperative
Retail FacilitiesKahler Automation Designs State-Of-The-Art Facility For Heritage Cooperative
July 4, 2016
Heritage Cooperative in Marysville, OH, needed an efficient liquid, dry and grain facility to serve the many needs of their Read More
The Andersons Waterloo
ManagementFirst Indiana Facility Certified Under 4R Nutrient Stewardship Certification Program
June 27, 2016
The 4R Nutrient Stewardship Certification Program has announced that The Andersons, Inc.’s Waterloo, IN, facility has been added to its Read More
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To Explore IT Solutions
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
Monsanto Luling Plant
Eric SfiligojWhat’s Next For Monsanto?
May 31, 2016
For the folks at Monsanto’s headquarters in St. Louis, MO, it has been an eventful few weeks. Back on May Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Latest News
Crop InputsDuPont Pioneer: Corn Belt P and K Levels Lagging
August 24, 2016
A new DuPont Pioneer study conducted across 12 Corn Belt states demonstrates that growers may be leaving profit potential in Read More
Monsanto sign
Crop InputsCould a Monsanto-Bayer Union Be 2 Weeks from Fruition?
August 24, 2016
Via STLToday.com (The St. Louis Post-Dispatch): Merger talks between Monsanto Co. and Bayer AG are advancing after a series of Read More
EquipmentCase IH Debuts Nutri-Tiller 955 Strip-Till Applicator
August 24, 2016
With strip-till continuing to expand across new acres, Case IH designed the new Nutri-Tiller 955 strip-till applicator to help producers Read More
EquipmentCase Launches Aim Command FLEX, 25th Anniversary Patrio…
August 24, 2016
Case IH announces new AIM Command FLEX advanced spray technology for greater application accuracy, as well as special 25th Anniversary Read More
ASMARK 2016 Retailers Live! Tour - CPS
CropLife 100CPS Acquires Texas Retail Operation
August 23, 2016
Crop Production Services (CPS) has acquired the assets of Larry’s Chemical and Spray, Inc., for an undisclosed amount in an Read More
PrecisionAg Video Conference
Precision AgVideo: PrecisionAg Vision Conference
August 22, 2016
A Strategic Conference Focused on the Future of Farm Digitization and Precision Agriculture Visit precisionagvision.com and register today! Read More
Young Corn Plants
Industry NewsOABA Welcomes Nicole Wallace As Communication & Adm…
August 22, 2016
The Ohio AgriBusiness Association has hired Nicole Wallace as its communication and administrative coordinator. Wallace will help provide comprehensive communication Read More
Syngenta Sign
Crop InputsChemChina, Syngenta Receive Clearance From CFIUS
August 22, 2016
China National Chemical Corp. (ChemChina) and Syngenta have announced that the companies have received clearance on their proposed transaction from the Read More
ManagementAg Industry Shows and Rumors
August 18, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about the upcoming trade show schedule, crop protection merger updates, and content for Read More
MAGIE 2015
EquipmentMAGIE Takes The Pulse Of The Ag Retail Industry
August 18, 2016
Every year, one of the major highlights of my career as an ag journalist is attending the Midwest AG Industries Read More
MAGIE 2015 Overview
EquipmentPride In Professionalism On Display At MAGIE
August 18, 2016
The Illinois Fertilizer & Chemical Association (IFCA) is proud to partner with CropLife IRON and continue the tradition of bringing Read More
SprayersJenner Ag To Debut 25th Anniversary Edition Case IH Pat…
August 18, 2016
Visitors at the 2016 Midwest Ag Industries Exhibition (MAGIE) in Bloomington, IL, will have a unique photo opportunity, as Jenner Read More
Crop InputsEU Glyphosate Controversy Heating Up Yet Again
August 17, 2016
The battle over glyphosate rages on in Europe, creating a lot of question marks over whether the herbicide will continue Read More
Industry NewsNew Partnership Provides Improved Representation At Ohi…
August 16, 2016
The Ohio AgriBusiness Association (OABA) has retained Belinda Jones of Capitol Consulting Group, Inc. (CCG) for government relations work in Read More
Tissue testing
FertilizerMosaic: 6 Tips For Better Crop Nutrition In Corn
August 16, 2016
Late in the crop season is a good time to assess visual nutrient deficiencies and ensure early- and mid-season deficiencies Read More
WebinarsWebinar Schedule
August 14, 2016
Register for one of our upcoming Webinars or access our archive of past Webinars to view recordings of presentations that may be of interest to you. Read More
Dow DuPont
Crop InputsDowDuPont Update: EU Takes Closer Look at Merger
August 12, 2016
Dow Chemical Co. and DuPont Co. face months of haggling with European Union antitrust regulators who opened an in-depth probe Read More
ManagementNews from InfoAg 2016 and Weed Wands
August 11, 2016
Editors Paul Schrimpf and Eric Sfiligoj review what happened at last week’s big Precision Ag event and a possible solution Read More