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

FertilizerNutrient Management, Conservation Among Topics Covered At Indiana CCA Conference
November 23, 2016
Certified crop advisers, consultants, farmers, agribusiness professionals and students will learn more about nutrient management, soil and water conservation, pest Read More
NutriSphere-N Application
Crop InputsVerdesian: NutriSphere-N Making A Water Quality Difference In Midwest
November 18, 2016
Farmers sitting on the largest aquifer in the United States have learned a thing or two about managing nitrogen (N) Read More
FertilizerThe Fertilizer Institute Issues Statement On The U.S. Elections
November 10, 2016
The Fertilizer Institute (TFI) President Chris Jahn has issued the following statement on the results of the 2016 elections: “TFI Read More
Fertilizer Storage
FertilizerThe Fertilizer Institute Hires New Director Of Agronomy
November 4, 2016
The Fertilizer Institute (TFI) has hired Dr. Sally Flis as its director of agronomy, a new position created to support Read More
Trending Articles
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Precision AgTrimble Debuts End-to-End FMIS Platform
November 28, 2016
October’s inaugural PrecisionAg Vision Conference left this author with many thoughts and things to ponder in the coming months. Probably Read More
CHS Primeland
CropLife 100The 2016 CropLife 100 Report: Reviewing The Many Bulls And Bears Impacting This Year’s Marketplace
November 28, 2016
For virtually all of 2016, the nation was wholly focused on the big Presidential election. Some folks aligned themselves with Read More
Monsanto sign
Crop InputsMissouri Governor Meets With Bayer CEO To Discuss Monsanto Merger
November 21, 2016
Missouri Gov. Jay Nixon visited Bayer AG global headquarters in Leverkusen, Germany, on November 18 to discuss the proposed Bayer-Monsanto Read More
STS16 2017
SprayersHagie Manufacturing Releases 2017 STS16 Sprayer To Market
November 16, 2016
Hagie Manufacturing LLC’s largest full season applicator is now available with enhancements for the 2017 model year. Hagie is officially Read More
Wilco
CropLife 100Valley Agronomics, Wilco-Winfield To Form New Agronomy Joint Venture
November 11, 2016
Valley Agronomics LLC, headquartered in Rupert, ID, is a joint venture between Valley Wide Cooperative and Winfield Solutions, LLC. Wilco-Winfield, Read More
Latest News
Fertilizer storage The Andersons
CropLife 1002016 Fertilizer Report: Another Really Rough Year For A…
December 7, 2016
In many ways, the fertilizer category cannot seem to catch a break. During the early part of the 2010s decade, Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Winter wheat
HerbicidesTalinor Herbicide Approved For Wheat And Barley
December 7, 2016
Talinor herbicide from Syngenta has received federal registration from the U.S. EPA, giving wheat and barley growers a new option Read More
Forage Sorghum
UncategorizedMilestone Achievement Continues For Dow AgroSciences, A…
December 7, 2016
New and innovative forage products are on the horizon driven by continued collaboration between Dow AgroSciences, a wholly owned subsidiary Read More
Palmer pigweed seedhead in cotton
HerbicidesNew WSSA Factsheet Explores Weed Seeds And Their Longev…
December 7, 2016
Did you know some weed seeds can lie dormant in the soil for more than a century and then sprout Read More
Crop InputsARA 2016: 5 Developments Worth Monitoring Into 2017
December 6, 2016
You can pretty much set your watch to it (do people even still wear watches? I know I do…but I’m Read More
Tim McCardle, ARA Chairman
CropLife 100BRANDT COO Named ARA Chairman
December 5, 2016
BRANDT EVP and Chief Operating Officer Tim McArdle has been named chairman of the Agricultural Retailers Association (ARA) during a Read More
Crop InputsWilbur-Ellis Receives ResponsibleAg Certification At Mo…
December 5, 2016
Wilbur-Ellis Co., a recognized leader in precision agriculture technology and the distribution of crop protection products, announces the ResponsibleAg certification Read More
Young Corn Closeup
Eric SfiligojThe Read On 2017 For Agricultural Fortunes Is Anybody’s…
December 5, 2016
As I (and others) have written in recent months, the nation has just experienced one of the most offbeat election Read More
Acceleron B-300 seed coating
Crop InputsThe BioAg Alliance Launches New Yield-Boosting Microbia…
December 5, 2016
As part of their commitment to develop and commercialize innovative microbial solutions for farmers through The BioAg Alliance, Monsanto Co. Read More
ManagementCorn and soy planting update; Takeaways from Climate Co…
December 2, 2016
AgriBusiness Global Editor Dave Frabotta Joins Paul Schrimpf for a discussion of global corn and soybean planting trends, and a Read More
Radish cover crop taproot
Crop InputsSoil Health Institute, Datu Research Receive Grant To E…
December 1, 2016
The Soil Health Institute (SHI) and Datu Research have announced a $626,000 grant from the Walton Family Foundation to quantify the Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
ManagementAg Industry Comes Together To Address Climate Change
December 1, 2016
Addressing climate change — and more specifically, decreasing greenhouse gas emissions from agriculture — can only be achieved through collective Read More
Young soybean field
HerbicidesLiquid Formulation Valor EZ Herbicide Available For 201…
December 1, 2016
Valent U.S.A. Corp. has released Valor EZ; a liquid formulation of the company’s leading herbicide, Valor. Named Valor EZ Herbicide Read More
Key Cooperative Marcus Construction Steel Building
ManagementThe Value Of Cooperatives In Modern Agriculture
December 1, 2016
Editor’s Note: Jaxon Mullinnix of  Lone Tree, IA, was recently named the Iowa state winner of the 2017 GROWMARK essay Read More
AGCO Operator of the Year Tony Kornder
SprayersAGCO Names Tony Kornder Operator Of The Year
December 1, 2016
AGCO Corp. names Tony Kornder with Genesis Growing Solutions in Le Sueur, MN, the 11th annual Operator of the Year. Read More
Chris Henney OABA
ManagementOABA Industry Conference To Provide Outlook For Future …
November 29, 2016
The upcoming Ohio AgriBusiness Association Industry Conference is packed with widely-respected speakers and industry professionals, sharing their expertise on a Read More