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

Truck dumping dry fertilizer
FertilizerFertilizer Logistics Q&A: Southern States’ Joe Wlodkoski
May 2, 2016
Joe Wlodkoski, Director of Agronomy Procurement, Fertilizer, Southern States Cooperative, is a 40-plus year fertilizer industry veteran. He is quite Read More
West Central Dome structure
FertilizerFertilizer Logistics 2016: All Clear, So Far
May 1, 2016
After a relatively hairy early start to the spring fertilizer movement season with flooding in Louisiana and St. Louis, things Read More
Young corn plants in soil
FertilizerNutrients For Life Foundation Launches New Environmental Science Supplement For High School Teachers
April 13, 2016
The Nutrients for Life Foundation released the latest resource for high school teachers entitled Feeding the World & Protecting the Read More
Flooded corn in Indiana
FertilizerLa Niña Or El Niño: Both Affect Growers’ Nitrogen Investments
April 12, 2016
Submitted by Verdesian Life Sciences As growers prepare for planting, they will be anxiously checking the weather forecast. Midwest growers Read More
Trending Articles
Eric SfiligojReasons For Hope In Commodity Prices
May 2, 2016
For many months now, the doomsayers have ruled the day in agriculture. Too much supply with too little demand would Read More
Eric SfiligojMissing The Family Ties In Agriculture
April 25, 2016
By its nature, the agriculture market is cyclical. Up and down cycles come and go with a regular pattern. For Read More
HerbicidesHerbicide Resistance In Waterhemp Continues To Grow
April 22, 2016
Twenty-five years ago, waterhemp was virtually unknown to Illinois farmers. Today, the broadleaf weed blankets corn and soybean fields across Read More
Eric SfiligojBiotech Corn Drop More Economics Vs. Consumer Rejection
April 18, 2016
Since their introduction into the agricultural marketplace, biotech crops has steadily grown in acreage in the countries of the world Read More
Crop InputsBayer: 5 Reasons We Disagree With Maryland Neonic Ban
April 12, 2016
We’re disappointed that the Maryland legislature chose not to stand up for sound science and the rights of Maryland’s homeowners Read More
Corn
OpinionChallenging Global Economic Conditions Putting More Heat On U.S. Ag Retailers
April 7, 2016
There it is. That vague, slightly sickening feeling in the pit of my stomach. Things are getting weird out there. Read More
Latest News
Industry NewsHELM AGRO Adds New Marketing & Business Development…
May 4, 2016
HELM AGRO US, Inc. has announced the hiring of Troy Bettner as the company’s new Marketing & Business Development Leader. Bettner Read More
Palmer amaranth in soybean stubble
HerbicidesWSSA: Billions In Potential Economic Losses From Uncont…
May 4, 2016
What losses would corn and soybean growers experience if they were forced to eliminate herbicides and other control techniques from Read More
Spray Drift
HerbicidesRoundup Ready Xtend: Silver Linings In Label Delays For…
May 4, 2016
Since 2014, Monsanto has trained more than 20,000 growers and retailers on all aspects of its new dicamba-tolerant system at Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSyngenta Board Appoints New CEO
May 4, 2016
Syngenta announced today the appointment of J. Erik Fyrwald, currently President and CEO of the U.S. chemistry distribution company Univar Read More
Crop InputsIntrexon Establishes Crop Protection Enterprise
May 4, 2016
Intrexon Corp., a leader in synthetic biology, has announced the formation of Intrexon Crop Protection (ICP), a wholly-owned subsidiary dedicated to Read More
Patriot 4440 Sprayer close up
ManagementFlashing Back And Moving Forward On Spray Drift
May 3, 2016
The potential for pesticide drift remains an unavoidable feature of modern agriculture. Here, too, history repeats itself. “When Roundup debuted, Read More
Giant Ragweed
HerbicidesSurvey Provides Insights On Giant Ragweed In The Corn B…
May 2, 2016
A new survey published in the journal Weed Science offers insights into the distribution and management of giant ragweed, a Read More
Truck dumping dry fertilizer
FertilizerFertilizer Logistics Q&A: Southern States’ Joe Wlod…
May 2, 2016
Joe Wlodkoski, Director of Agronomy Procurement, Fertilizer, Southern States Cooperative, is a 40-plus year fertilizer industry veteran. He is quite Read More
Eric SfiligojReasons For Hope In Commodity Prices
May 2, 2016
For many months now, the doomsayers have ruled the day in agriculture. Too much supply with too little demand would Read More
West Central Dome structure
FertilizerFertilizer Logistics 2016: All Clear, So Far
May 1, 2016
After a relatively hairy early start to the spring fertilizer movement season with flooding in Louisiana and St. Louis, things Read More
BAICOR
CropLife 100BRANDT Acquires Utah Specialty Fertilizer Company
April 28, 2016
BRANDT, a leading agriculture retailer and manufacturer of specialty ag products, has acquired a majority interest in BAICOR, L.C. BAICOR, Read More
Soybean field
Industry NewsVerdesian Life Sciences Adds Vice President Of Business…
April 28, 2016
Verdesian Life Sciences has announced the addition of Marc Treurniet to the plant health and nutrition company’s management team. Treurniet Read More
ManagementBiotech Crops Developments and Millennials
April 28, 2016
Editors Eric Sfiligoj and Paul Schrimpf talk about the latest activities in biotech crops and a major shift in the Read More
Industry NewsNachurs-Alpine, Pathway Biologic Extend Marketing Agree…
April 28, 2016
Nachurs-Alpine Solutions (Marion, OH) and Pathway Biologic (Plant City, FL) announce an extension to their exclusive marketing agreement specific to Read More
MicronutrientsCharah Add Three Warehouses For SUL4R-PLUS Fertilizer
April 28, 2016
Charah, Inc., a total solutions company providing unparalleled service and innovation for the coal-fired power generation industry, announced today that Read More
Spenser Forgey, Yahama Fortix
FungicidesIndiana Farmer Wins Arysta LifeScience FORTIX Fungicide…
April 28, 2016
Arysta LifeScience North America recently presented Spenser Forgey, a grower from Young America, IN, with a new 2016 Yamaha Grizzly Read More
Corn Field
HerbicidesNew Wilbur‐Ellis Herbicide Targets Volunteer Corn
April 28, 2016
Wilbur‐Ellis Co., a recognized leader in marketing and distribution of crop protection products, as well as precision agriculture technology, has Read More
StewardshipNRCS To Help Farmers Measure Conservation Impacts On Wa…
April 27, 2016
The USDA has announced the availability of $2 million to help farmers install edge-of-field stations that monitor water quality as Read More