Fertilizer: How Much Will Demand Rebound?

There is little doubt that crop nutrient demand will rebound this year following the unprecedented declines of 2008-09. The key question is: How much?

The decline in crop nutrient demand last year exceeded even the most pessimistic forecasts a year ago. For example, the most recent estimates released by the International Fertilizer Industry Association last November indicate that global nitrogen (N), phosphate (P), and potash (K) use dropped 1.5%, 10.5%, and 19.8%, respectively, last year.

Although no official statistics are available yet, anecdotal evidence and other data point to a sharp decline in U.S. crop nutrient demand last year, especially P and K use. Based on actual planted acreage and application rate guesstimates, we estimate that N use in the U.S. dropped 4% to 6%, P use declined 15% to 20% and K use plunged 35% to 40% during the year that ended on June 30, 2009. One of the first indications of the magnitude of the drop in U.S. crop nutrient use comes from Missouri. The state regulatory agency already has released tonnage statistics compiled from crop nutrient tax receipts. These statistics reveal a 25% drop in total nutrient demand and declines in N, P, and K use of 13%, 41%, and 53%, respectively, in 2008-09. Missouri likely registered one of the largest declines in state tonnage last year.

Reliable inventory, production, and trade statistics indicate that implied domestic shipments dropped even more than the estimated declines in demand and imply a de-stocking of the domestic distribution channel last year. For example, domestic shipments of the leading solid phosphate products (DAP and MAP) declined 40% or 3 million tons, and North American shipments of muriate of potash (MOP) plunged 50% or 5.3 million tons last year. Based on information available today, our assessment is that inventories from the mouth of the distribution pipeline to the farm field were pulled down significantly last year.

Reasons For Optimism

We are optimistic about demand and shipment prospects this year for several reasons. First, despite large declines in key grain and oilseed prices following the release of several USDA reports on January 12, farm economics for most crops in most regions of the world remain favorable. Grain and oilseed prices still trade at relatively high values and crop inputs costs have declined from the high levels a year ago. Furthermore, prices for some crops such as cocoa, cotton, palm oil, rice, and sugar today are trading at levels significantly higher than those of a year ago.

Second, crop nutrient prices have declined from a year ago. For example, based on the current new crop corn price and wholesale crop nutrient costs, we estimate that a grower would have to sell about 25 bushels of corn to purchase crop nutrients this spring. That is up from an estimate of about 20 bushels late last year due to the recent drop in corn prices, but it is down from an average of 40 bushels for the last two years. In fact, we estimate that the cost of crop nutrients for a high-yield Midwest corn operation will decline from about $145 per acre last year to just more than $90 per acre this spring.

Third, nearly all of the feedback from our customers indicates growers applied normal or near-normal rates of P and K during the fall application season. Some growers had adequate nutrients stored in their soils to reduce or even skip P and K application last year, but given the drawdown of soil nutrient levels in 2009 and a more favorable grain:crop nutrient price ratio, it looks like application rates will recover in 2009-10.

Finally, our assessment is that some re-stocking of a rundown distribution pipeline likely will occur this year, particularly if distributors expect that prices have bottomed. Many distributors began to position phosphate for deferred application toward the end of last year. As a result, we expect that shipments of many products likely will exceed projected use this year in order to re-stock the channel inventories to more normal levels.

In the case of P, we estimate global import demand will increase 4% to 6%, or 800,000 to 1.2 million tonnes in 2010. Imports by India are projected to remain at the high levels of the past two years, and other important regions such as Latin America and Oceania are expected to register increases this year. Domestic DAP and MAP shipments are forecast to increase from just 4.8 million tons in 2009-10 to 6.7 to 7.1 million tons this year. The Olympic average (highest and lowest annual volumes excluded) for the past 10 years is 7.1 million tons. Shipments during the first half of the crop nutrient year (July to December) were up 57%, or 1.2 million tons from the extremely low levels of a year earlier. Several developments, ranging from ideal weather during November that salvaged a fall application season to the surprise purchase of 600,000 tonnes of DAP by China, have combined to swing phosphate market sentiment from negative to positive. As a result, after bottoming at close to break-even levels during the first week of November, P prices have increased about 50% since then.

Looking At K

In the case of K, global MOP trade peaked at more than 44 million tonnes in 2007 and then plunged to less than 23 million tonnes in 2009. We project global import demand will recover to 37 million to 39 million tonnes in 2010. Imports are forecast to rebound in all of the major importing regions following sharp declines last year. North American MOP shipments also are forecast to increase from the low levels last year. In particular, we project domestic shipments will climb from just 5.3 million tons in 2008-09 to 7.7 million to 9.4 million tons in 2009-10. The 10-year Olympic average is 10.5 million tons. Shipments during the first half of the crop nutrient year (July to December) still were down 25% from the higher levels of a year earlier, so large shipments are required during the first half of 2010 to meet projected demand. Implied shipments increased in December and that momentum is expected to carry over into the first half of 2010.

Our analysis shows producers and importers will need to ship near-record tonnage of the major solid fertilizer products during the first half of 2010 in order to meet a moderate recovery in North American demand. How much demand recovers, how much ships during the first 45 days of 2010 and how orderly the spring application season unfolds will determine if any pinch points develop throughout the supply chain this spring.

Leave a Reply

Fertilizer Stories

Crop InputsOhio State Researchers Announce Progress on ‘Phosphorus Signature’ Monitoring
October 27, 2016
Researchers at The Ohio State University are investigating new techniques to detect organic phosphorus compounds in water samples from the Read More
Wheat Field North Dakota
FertilizerUnited Suppliers Acquires Kansas Fertilizer Business
October 17, 2016
United Suppliers, Inc. has purchased the assets of Evans Enterprises, LLC, an ammonium chloride fertilizer business based in Olathe, KS. Read More
Young Corn Field
FertilizerImproved Phosphorus Management Essential To Feeding World Population
October 14, 2016
With a global population expected to reach 9 billion people by 2050, improved management of key essential nutrients such as Read More
Potash Corp Agrium
Crop InputsAgrium, Potash Corp To Merge To Create $36 Billion Company
September 12, 2016
Canada’s Agrium Inc. and Potash Corp of Saskatchewan Inc. have agreed to combine in a deal that would create a Read More
Trending Articles
Matt Hopkins15 Twitter Accounts Every Ag Professional Must Follow
October 13, 2016
What do singer Katy Perry and the President of the United States have in common? They are two of the Read More
AGCO RG700 cab
OpinionRoadblocks To Precision Ag Innovation
October 5, 2016
On August 29, I got to preside over the PrecisionAg Innovation Series event, “Game-Changing Advances in Precision Farming Technology,” developed Read More
J.C. Ramsdell containment system
EquipmentClear Opportunity In The Tank Market
October 4, 2016
Crop prices may be down, but steel prices are too — and that’s good news for retailers looking to add some Read More
WinField booth Farm Progress
Special ReportsTalking Weed Management Strategies At Farm Progress 2016
October 2, 2016
The annual Farm Progress Show — this year staged in Boone, IA — is always a great place to catch Read More
Corn Field
Eric SfiligojFacing Ag Industry Challenges
September 26, 2016
At the 2016 annual Mid America CropLife Association (MACA) meeting in September, a pair of crop protection company representatives discussed Read More
Bayer Monsanto
Crop InputsBayer-Monsanto Mega-Merger: 6 Things You Need To Know
September 14, 2016
Mega mergers have become almost routine in the agricultural industry. Right on the heels of Monday’s news that fertilizer giants Potash Read More
Latest News
Eric SfiligojThe 2016 CropLife 100 Preview
October 28, 2016
Fall is in full swing and we at CropLife magazine are busy putting the finishing touches on our end-of-the-year stories and Read More
ManagementHighlights from the PrecisionAg Vision Conference
October 28, 2016
Editors Eric Sfiligoj and Matthew Grassi discuss what was talked about at the 1st annual PrecisionAg Vision Conference and provide Read More
Crop InputsOhio State Researchers Announce Progress on ‘Phos…
October 27, 2016
Researchers at The Ohio State University are investigating new techniques to detect organic phosphorus compounds in water samples from the Read More
Stewardship4R Nutrient Stewardship Certification Program To Launch…
October 26, 2016
The 4R Nutrient Stewardship Certification Program will expand the voluntary retailer program to the full state of Ohio, allowing nutrient Read More
AGCO RG700 at the 2015 National Farm Machinery Show
EquipmentAGCO Parts Rolls Out No-Interest, No-Payments Offer Via…
October 26, 2016
AGCO Corp. is now offering an innovative financing solution on qualifying Parts and Service transactions. Now through December 31, 2016, Read More
Soybean field
Crop InputsIncotec Invests In North America
October 25, 2016
Leading seed enhancement company Incotec, part of Croda, has announced an investment in their North America business. The total investment of Read More
Patriot 25th anniversary
SprayersCase IH Celebrates 25 Years Of Patriot Sprayers At Bens…
October 24, 2016
Case IH executives, employees and special guests celebrated 25 years of production of Case IH Patriot sprayers in a special Read More
4r Nutrient stewardship
StewardshipNominations For The 4R Advocate Program Due October 31
October 24, 2016
Nominations for the 4R Advocate program are due to The Fertilizer Institute by October 31, 2016. The program recognizes agricultural Read More
Corn close up
Eric SfiligojProtecting Agriculture’s Ability To Feed The World
October 24, 2016
The rate of change coming to agriculture is growing, and will continue to do so for the foreseeable future. This Read More
Student Young Worker CHS
CropLife 100CHS Supports #FirstJob Compact
October 24, 2016
CHS joins the White House and many of the country’s largest employers in signing a new initiative centered on helping Read More
Kennebec Grain terminal
CropLife 100Wheat Growers Kennebec Facility Loads First Rail Cars
October 21, 2016
In a season of firsts for Wheat Growers’ Kennebec Grain Terminal, the first 115-car unit train was loaded with soybeans Read More
ManagementThe Latest Dow-DuPont Rumor, Product of the Year Voting…
October 20, 2016
CropLife Editor Eric Sfiligoj shares a new rumor about the Dow-DuPont merger and updates on two CropLife-driven programs, the CropLife Read More
Soybean Closeup
FungicidesFMC Begins Registration Process For New Fungicide Activ…
October 19, 2016
FMC Agricultural Solutions has begun the joint U.S. EPA and Canadian Pest Management Regulatory Agency registration process for bixafen, a new Read More
Soil Young Corn
Industry NewsAgribusiness Search Firm Appoints New Managing Partner
October 18, 2016
Morris Bixby Group, a leading agribusiness search firm providing the highest quality professional recruiting and career advancement services since 2000, Read More
Wheat Field North Dakota
FertilizerUnited Suppliers Acquires Kansas Fertilizer Business
October 17, 2016
United Suppliers, Inc. has purchased the assets of Evans Enterprises, LLC, an ammonium chloride fertilizer business based in Olathe, KS. Read More
Corn Field
Industry NewsFMC Launches New Operations In Argentina, Exits Joint V…
October 17, 2016
FMC Corp. has exited its joint venture with Ruralco Soluciones S.A. FMC has launched new commercial operations, FMC Quimica S.A., Read More
Dow AgroSciences
InsecticidesRenewed Registration Issued For Products Containing Sul…
October 17, 2016
On October 14, 2016, the U.S. EPA re-established the registration of products containing sulfoxaflor (Isoclast Active), including Transform WG, Closer Read More
Eric SfiligojThe Whys Of Agriculture
October 17, 2016
During 2016, there have been myriad challenges facing the whole agricultural industry. Such wide ranging issues as water protection, sustainable Read More