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
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 100The Andersons Starts Venture Capital Subsidiary
January 26, 2015
The Andersons has established Maumee Ventures, a venture capital subsidiary designed to foster promising innovations that strategically align with the company’s core businesses. Read More
CropLife 100CHS Partners With Northern Partners Coop On Fertilizer Warehouse
January 21, 2015
In addition, the two companies will form a joint venture to build and operate a grain barge loading facility that will handle corn, soybeans and wheat for export through the CHS terminal at Myrtle Grove, LA. Read More
CropLife 100Wilbur-Ellis Move To Colorado Complete
January 20, 2015
Wilbur-Ellis Co. announces the opening of its new Agribusiness Division location in the Denver, CO, Metro Area. The new facility will host key personnel as the company shifts the base of its Agribusiness operations from California to Colorado. Read More
CropLife 100United Suppliers, McGregor Co., Five Others To Form Aligned Ag Distributors
January 20, 2015
These companies will continue to operate as independently owned and operated businesses, however, their crop protection divisions will now be formally aligned under the umbrella of Aligned Ag Distributors. Read More
CropLife 100Bozeman Named SEEDWAY Chief Operating Officer
January 16, 2015
He succeeds Donald Wertman, who will retire at the end of August 2015 after 40 years with the GROWMARK subsidiary. Read More
CropLife 100Wilbur-Ellis’ Craig Bair Honored For Safety Contributions To Ag Aviation
January 14, 2015
The William O. Marsh Safety Award recognizes significant achievements in safety, safety education or an outstanding operational safety program. Read More
Latest News
Seed/BiotechDow Details Enlist Trait Stacking Standards
January 30, 2015
Dow says it will allow the Enlist trait to be stacked with advanced glyphosate traits only, and will not allow stacking with the first generation of the Roundup Ready trait. Read More
ManagementCropLife Retail Week: IFCA’s Jean Payne on Illinois wat…
January 30, 2015
Editor Eric Sfiligoj shares insight from the Illinois Fertilizer and Chemical Association conference including a chat with IFCA President Jean Read More
ManagementOABA Conference Set To Highlight Trends, Technology And…
January 29, 2015
The third annual Ohio AgriBusiness Association (OABA) Industry Conference is set to take place February 4-5. Read More
FertilizerThe Fertilizer Institute President Jahn Testifies Befor…
January 28, 2015
The committee hearing, "Freight Rail Transportation: Enhancing Safety, Efficiency, and Commerce," looked at challenges facing our nation's freight rail network created by higher demand, rules and regulations and infrastructure needs. Read More
HerbicidesPurdue University Acquires Technology For Herbicide Mol…
January 28, 2015
Protea's LAESI DP-1000 Instrument System will be used in Purdue's College of Agriculture, the Department of Botany and Plant Pathology, for the molecular imaging of herbicide active ingredients and other related compounds to optimize herbicide applications and improve weed management.  Read More
FertilizerH.J. Baker Hires New Crop Peformance Marketing Manager
January 27, 2015
As Marketing Manager for the Crop Performance division, Usman Khalid will work out of H.J. Baker’s global headquarters in Westport, CT, and will drive new initiatives for the division. Read More
CropLife 100The Andersons Starts Venture Capital Subsidiary
January 26, 2015
The Andersons has established Maumee Ventures, a venture capital subsidiary designed to foster promising innovations that strategically align with the company’s core businesses. Read More
Exclusive state-of-the art Stueve Construction designed “Vista View” Elevated Control Room.
Eric Sfiligoj2015 Agricultural Market Read: Mixed
January 26, 2015
The agricultural market could look radically different this year, profit-wise, depending upon which segment you do business in. Read More
Edward Chell Biosafe
Crop InputsBioSafe Systems Names Ed Chell California Territory Man…
January 26, 2015
BioSafe Systems has announced the recent addition of Ed Chell as California Territory Manager for the agrichemical division, supporting the crop protection, water treatment and food safety business segments. Read More
InsecticidesBayer CropScience Introduces Sivanto Insecticide
January 26, 2015
Sivanto precisely targets key damaging pests at multiple insect life stages to prevent damage to plants and help minimize the spread of diseases from insect carriers. Read More
ManagementRetail Collaboration, Communicating Agriculture’s Good …
January 23, 2015
Editors Paul Schrimpf and Eric Sfiligoj discuss the recent creation of Aligned Ag Distributors, and the US Farmers and Ranchers Read More
FertilizerOSU Expert: Toledo Water Crisis A Turning Point For Ohi…
January 23, 2015
The August 2014 water crisis in Toledo, OH, impacted Ohioans’ views of Lake Erie algae problems by increasing the attribution of blame of algae growth on agriculture. Read More
FertilizerH.J. Baker Launching TIGER XP
January 22, 2015
Tiger-Sul introduces this next generation sulphur-bentonite product with a proprietary activator – ensuring farmers have a well-balanced nutrient replacement program. Read More
Crop InputsH.J. Baker Expands China Sales Force
January 21, 2015
Global Agricultural firm H.J. Baker announced that sales veteran Shi Dongshen has joined their Shanghai office in China. This newest hire follows the recent opening of their Lianyungang Sulphur Bentonite Plant. Read More
CropLife 100CHS Partners With Northern Partners Coop On Fertilizer …
January 21, 2015
In addition, the two companies will form a joint venture to build and operate a grain barge loading facility that will handle corn, soybeans and wheat for export through the CHS terminal at Myrtle Grove, LA. Read More
Matt Hopkins5 Bold Predictions For Ag Retail In 2015
January 21, 2015
This past year was filled with ups and downs for the nation’s top ag retailers, but what will 2015 have in store? Read More
SoftwareDeere Launches App Center
January 20, 2015
The John Deere App Center provides users the ability to search and find apps most useful to their business or operations. Read More
Crop InputsNew Syngenta Herbicide Approved In Soybeans, Sunflowers
January 20, 2015
Syngenta will sell BroadAxe XC herbicide in 2015 for use on soybeans, sunflowers and dry peas Read More