Fertilizer Market: Walking A Tight Rope

Even before the first spreaders take to the field, 2008 is setting up to be a bit of a disappointment for fertilizer — compared with 2007, that is. As U.S. growers jumped onto the biofuels bandwagon, planting 93.6 million acres of corn, fertilizer demand hit near record highs throughout 2007 — despite the fact that prices were also rising at a rapid pace and global demand kept supplies on the extremely tight side of the equation.

“Prices are very, very high for phosphorous (P), potassium (K), and nitrogen (N),” says Lloyd Murdock, Extension soil specialist for the University of Kentucky. “Demand is up from all over the world. We’ve been used to cheap fertilizer for decades and haven’t had to worry much about efficiency. Now we have to think about efficient use of fertilizer more than we ever had.”

Coupled with this, the transportation costs have also risen sharply. “When fuel went from $1.80 per gallon to $3 per gallon, that meant more for transporting the fertilizer,” says Rick Cartwright, professor and Extension plant pathologist for the University of Arkansas. “It costs more to mine or manufacture it, on down the line. So all fertilizer prices have gone up.”

Luckily for the marketplace, commodity prices have mirrored these increases in many ways, easing the financial pain grower-customers might have otherwise faced.

According to most market watchers, corn prices for 2007 in particular grew to more than $4 per bushel, despite the record number of acres being harvested. In the minds of most analysts, this strong demand for corn tied back to a single factor — the growth of the ethanol marketplace within the U.S. During 2007, ethanol production virtually doubled — from 4.5 billion gallons in 2006 to 8.9 billion gallons. By the end of the decade, it is projected that ethanol production will hit the 11.2 billion-gallon mark, even with modest growth. If corn remains the primary feedstock for the U.S. ethanol industry, this will increase the amount of the total corn crop needed to fuel this demand from 26% to better than 30%.

Even with these factors in play, many market watchers are already speculating that 2008 will be a much slower year for fertilizer. “Volume growth for any of the three nutrients will be limited,” says one major retail representative. “A decrease in corn acres with a corresponding increase in soybean acres will obviously hurt N. However, P and K are more subject to application deferral. K will probably hold up the best, volume-wise. The calendar year will be challenging because of the excellent fall application in 2007.”

The Breakdown

Looking at the individual fertilizer types themselves, N has been the most active the past year. According to statistics compiled by USDA’s National Agricultural Statistics Services, and the International Fertilizer Industry Association (IFA), N global consumption among the eight major crops increased from 12,044 nutrient tons in 2006 to 13,689 nutrient tons in 2007. This demand is projected to grow to 14,000 nutrient tons in 2008, moving forward at an annual rate of 1.8% through 2016. What makes this significant is the fact that between 1995 and 2006, the annual growth rate for N was only 0.2%.

Broken down even further, much of the activity in the N market these days centers on urea. According to IFA figures, urea production share rose from 36% in 2006 to 51% in 2007, increasing at approximately 4% per year since 1990. In comparison, the total annual growth of all other N products during this same time frame was 0%. Led by these increases, world urea demand is projected to increase from 140 million tons today to 152 million tons by 2010.

“While urea supply is projected to grow rapidly, the supply/demand balance will likely remain tight in 2008, easing slightly in 2009,” said IFA representatives Luc Maene and Michel Prud’homme in a presentation at the 2008 Fertilizer Outlook and Technology Conference. “A surplus would emerge during 2010.”

As for ammonia, world demand is up to approximately 123 million tons through 2007. According to IFA statistics, growth in this segment will be more modest during the next few years, with total demand hitting 130 million tons by the end of the decade.

Moving on to P, IFA estimates that world demand hit 40 million tons in 2007, and should increase slightly to 41 million tons by the end of 2008. Significantly, the supply for P should slightly outpace demand over the next few years, 4.2% to 3.6%, respectively.

“Exportable phosphoric acid will remain very tight in light of the few projects planned in the short term,” said Maene and Prud’homme. “Moreover, no new merchant capacity is under construction.”

According to IFA, K demand should follow a similar demand curve as P. In this category, world demand should grow from approximately 27 million tons in 2007 to 29 million tons in 2008.

“Potash supplies will increase in most exporting countries,” said Maene and Prud’homme. “Because of a shift towards more balanced fertilizer use, no significant K surplus will develop before 2011, at the earliest.”

In conclusion, Maene and Prud’homme predicted that 2008 will be a very difficult year for the fertilizer market, particularly from the supply standpoint. “All nutrient markets will be tight until 2009 as demand has expanded more rapidly than was expected a few years ago,” they said.

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
MAGIE 2015 Overview
Eric SfiligojThe Read From MAGIE
August 29, 2016
As I write this column, I’ve just returned from the annual Midwest AG Industries Exposition (MAGIE) in Bloomington, IL. Being Read More
EquipmentAGCO Opens Nominations For 11th Annual Operator Of The …
August 29, 2016
AGCO Corp. is now accepting nominations for 2016 Operator of the Year, which recognizes hard-working applicators across the country. These Read More
CHS St. Paul, MN fertilizer terminal
CropLife 100CHS Completes $10 Million Renovation Of St. Paul Agrono…
August 29, 2016
CHS Inc., North America’s leading farmer-owned cooperative and a global energy, grains and foods company, has completed a $10 million Read More
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