Fertilizer Market: Climbing Back

If you were comparing the fertilizer market of the past two fall seasons to a novel, it might be called “A Tale Of One Market.” Simply put, there were no best of times. There was only the worst of times.

According to the numbers, all fertilizer sectors experienced some level of decline during the past two years. On a global basis, analysts say that phosphate (P) usage dropped 10%. Potash (K) levels dipped 20%. Even nitrogen (N), which largely tends to remain more stable because of its shorter soil life cycle, was off 2%.

Following 2008, when many ag retailers were forced to write down hundreds of millions of dollars in unsold fertilizer inventory, 2009 wasn’t much of an improvement. “After 30 years in the fertilizer and chemical business, we have never seen a year like this one,” summed up Kathy Sims, president of Sims Fertilizer and Chemical, Osborne, KS, in CropLife’s® September 2009 market review.

Based upon these dismal numbers, most ag retailers and their suppliers would have probably been happy if the outlook for fall 2010’s fertilizer use rates were flat to up slightly. As it turns out, market trends are looking a little better than this. Early indications are that U.S. use for nitrogen-based crop nutrients such as urea and UAN should be up 4% to 7% vs. 2009. Domestic P shipments are expected to grow from 6.6 million tons in 2009 to 7 million tons. Meanwhile, domestic K should improve from 5.3 million tons in 2009 to 8.1 million tons.

According to Al Mulhall, senior director, market research for PotashCorp, there are multiple factors at work to explain fertilizer’s recovery. “First and foremost, U.S. growers severely cut back on their P and K usage in 2008 and 2009, and many of them recognize they need to replenish their soils in 2010 or risk losing yields,” says Mulhall. “In addition, crop economics have improved from the past two years and this is providing financial incentives to growers to use more fertilizer to boost their yields.”

On a more indirect level, he adds, fertilizer inventories around the world have fallen the past two years, which has helped improve supplier economics, and the Great Recession has ended, which has pushed the gross domestic product (GDP) levels back into the positive range. For example, the U.S. GDP fell 2.4% during 2009. Today, it is up 3.3%.

Then there is the general feeling among marketers that things are improving. “A good indicator of the mood of fertilizer comes from the Southwestern Fertilizer Conference,” says Mulhall. “In 2009, no one there was feeling that the market would perform well. But at the 2010 meeting, fertilizer buyers were very upbeat and positive that the market was improving.”

Modern Yields

According to Dave Coppess, executive vice president of sales and marketing for Heartland Co-op, West Des Moines, IA, positive feelings among fertilizer buyers for 2010 shouldn’t come as a big surprise, especially considering today’s modern farming practices. “The higher yields for crops such as corn that regularly occur today pull more reserved fertilizer out of the soil than ever was historically the case,” says Coppess. “This means the need to replace lost crop nutrients is greater than it’s ever been.”

Michael Rahm, vice president/market and economics analysis for The Mosaic Co., concurs. “The plants in the field don’t know anything about the price of fertilizer,” says Rahm. “They just know when they are staving for nutrients and react negatively if they don’t get them.”

Going forward, crop mix should also help spur the fall fertilizer usage rates. Early projections from USDA have corn acreage growing slightly going into 2011 to approximately 90 million acres. Furthermore, wheat acreage should also be up (in part in response to the recent news that the Russian wheat crop is in dire straits). This could push wheat acreage in 2011 into the 58 million to 60 million acre range.

“In many ways, the outlook for fall 2010 reminds me of the way things were back before the crash of 2008,” says Heartland’s Coppess. “Overall commodity prices were stronger back then, but today’s prices are much closer to what growers need to pull the trigger on their fertilizer use rates.”

If there is a potential market killer in the background, it could be the return of high fertilizer prices. When the crash of 2008 occurred, crop nutrients prices came down quickly and have stayed relatively low. But according to many market watchers, N and P prices are starting to climb back up. This is, in part, because of a decrease in available suppliers of these crop nutrients and the fact that Brazil’s usage of fertilizer is up approximately 24% from 2009 levels. This has caused some fertilizer prices, particularly P, to get close to the $500 per ton price point that many analysts say is the cut-off point for many growers.

“Growers have already shown they will not purchase some crop nutrients if that $500 threshold is passed,” says Coppess. “If market shortages push us back to that point, the dynamics that made 2008 happen could come back into play once again.”

Still, Mosaic’s Rahm is skeptical that a 2008-type market crash could happen all over again. “I would view this as unlikely,” he says. “In 2008, there were so many circumstances coming together at once, including high fertilizer prices combined with a general panic in the grain markets which sent prices tumbling. Things are much different now, and hopefully more stable to keep this from happening a second time in less than five years.”

Perhaps the best way 2010 can be summed up comes from Steve Martin, general manager for Crop Production Services, Portageville, MO. “Like everyone else, I’ve been looking for signs that the marketplace is getting back to normal when it comes to fertilizer,” says Martin. “So far, I haven’t seen that normal side yet.”

Leave a Reply

Fertilizer Stories

FertilizerGypsum Added To List Of Conservation Practices
July 28, 2016
Crop farmers in a growing number of states may be eligible for financial assistance from the USDA’s Natural Resources Conservation Read More
Storage Tanks at Nachurs
Crop InputsNACHURS Joins Field to Market
July 27, 2016
NACHURS announced today that it has joined Field to Market: The Alliance for Sustainable Agriculture, a leading multi-stakeholder initiative working Read More
Illinois Researchers
FertilizerMeasure Of Age In Soil Nitrogen Could Help Precision Agriculture
July 26, 2016
What’s good for crops is not always good for the environment. Nitrogen, a key nutrient for plants, can cause problems Read More
Corn Field
FertilizerPhosphorus: Complex, Inefficient, Essential
July 12, 2016
Submitted by Verdesian Life Sciences Managing phosphorous for optimum plant uptake and increased yield potential is no easy task. “Because of Read More
Trending Articles
Southeast Farmers Coop - Finished Building
Retail FacilitiesNew Stueve Facilities Offer Ag Retailers Speed, Accuracy
July 9, 2016
Leading the industry in planning and constructing dry fertilizer storage and chemical warehouse solutions, Stueve Construction helped three ag retailers 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
FertilizerGypsum Added To List Of Conservation Practices
July 28, 2016
Crop farmers in a growing number of states may be eligible for financial assistance from the USDA’s Natural Resources Conservation Read More
Management2016 CTIC Cover Crop Survey: 33% Report ROI From Cover …
July 28, 2016
Insight from 2,020 farmers from across the country reflected enthusiasm for cover crops and—for the fourth year in a row—found Read More
Palmer pigweed seedhead in cotton
HerbicidesStudy: Fall Weed Controls Can Make Significant Impact O…
July 28, 2016
An article published in the latest issue of the journal Weed Science shows that adopting harvest-time and post-harvest weed controls Read More
InsecticidesSyngenta: Beware Of Early Stinkbug Threat To Soybeans
July 28, 2016
With the record warm temperatures this past winter and confirmations from early entomologist reports, Syngenta encourages growers to monitor stinkbug Read More
Peanut field
Crop InputsVerdesian Introduces New Inoculant For Peanuts
July 28, 2016
As planning begins for the next growing season, Verdesian Life Sciences adds Primo Power CL, a new liquid inoculant, to Read More
Soil Young Corn
Crop InputsSmithsonian: 5 Things to Know About New GMO Labeling Bi…
July 27, 2016
On July 14, the House of Representatives passed a bill requiring large food companies to label products containing genetically modified Read More
Palmer pigweed in soybean stubble
HerbicidesSpecial Issue Of Weed Science Explores Human Aspects Of…
July 27, 2016
Weeds that evolve resistance to herbicides are a serious threat to global agricultural production. In this Special Issue of Weed Science, Read More
CHS Primeland
CropLife 100CHS Businesses In Washington, Idaho Combining For Great…
July 27, 2016
As full-service ag retailers, CHS Primeland and CHS Farmers Co-op collectively serve farmers and other customers in 15 counties in Read More
Storage Tanks at Nachurs
Crop InputsNACHURS Joins Field to Market
July 27, 2016
NACHURS announced today that it has joined Field to Market: The Alliance for Sustainable Agriculture, a leading multi-stakeholder initiative working Read More
Illinois Researchers
FertilizerMeasure Of Age In Soil Nitrogen Could Help Precision Ag…
July 26, 2016
What’s good for crops is not always good for the environment. Nitrogen, a key nutrient for plants, can cause problems Read More
Kochia
Crop InputsNufarm Launches New Herbicide for Resistant Kochia
July 25, 2016
Nufarm introduces Scorch herbicide for U.S. farmers and ranchers combating a broad range of troublesome broadleaf weeds. A unique premix Read More
ManagementNew Rabobank Report Calls for Farmer ROI Focus
July 25, 2016
As U.S. row crop farmers brace themselves for a third year of negative margins, Rabobank believes farmers must lower the Read More
Syngenta Sign
Crop InputsBloomberg: Syngenta-Chem China Deal on Track for Regula…
July 25, 2016
Syngenta AG, which has agreed to be taken over by China National Chemical Corp. for $43 billion, said talks with Read More
ManagementGROWMARK Meeting Visit, Company Takeover Updates, and R…
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
Crop InputsMonsanto: EU Approves Roundup Ready 2 Xtend Imports
July 22, 2016
Monsanto Co. announced today that the European Commission has granted import approval for Roundup Ready 2 Xtend soybeans. This milestone Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSyngenta Announces Alfalfa Seed Split Off
July 22, 2016
On September 1, 2016, Syngenta will transfer sales and distribution of alfalfa seed to the NEXGROW branded business that is Read More
Dow DuPont
Crop InputsDuPont, Dow Shareholders Approve Merger
July 21, 2016
DuPont and The Dow Chemical Company announced that, at their respective special meetings of stockholders held today, stockholders of both Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Oth…
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More