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

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
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
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
Latest News
2016 ShowStopper | Case IH Patriot 4440 Sprayer
Equipment5 Show-stopping Products On Display At 2016 MAGIE
August 26, 2016
For 10 years now, visitors to the yearly Midwest AG Industries Exposition (MAGIE) show have been tasked with voting for Read More
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