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

FertilizerYara Tampa Ammonia Terminal Garners ResponsibleAg Honors
November 25, 2015
Yara has received its first ResponsibleAg Certification for its Tampa, FL, Ammonia terminal location. This achievement demonstrates Yara’s commitment to Read More
Tiger Sul Crop Nutrient Calculator
FertilizerH.J. Baker Launches New Nutrient Calculator App
November 12, 2015
H.J. Baker, a global agriculture firm, has launched a new agronomic nutrient calculator app. This innovative and powerful tool will Read More
FertilizerH.J. Baker Hosting Chinese Delegation
November 12, 2015
International Agricultural firm, H.J. Baker, is hosting a delegation from Beijing Xinhefeng Agrochemicals Co., Ltd. (XHF), a leading distributor of Read More
corn field
FertilizerWest Central Distribution Launches Levesol DFC
November 5, 2015
Levesol DFC, a dry fertilizer compatible version, joins the original Levesol as another option for growers to maximize the potential Read More
Top 100 Articles
CropLife 100United Cooperative Acquires Four ADM Wisconsin Facilities
November 12, 2015
United Cooperative, based out of Beaver Dam, WI, recently acquired four grain and agronomy locations from Archer Daniels Midland (ADM) Read More
CropLife 100BRANDT Car Makes NASCAR Xfinity Series
October 29, 2015
BRANDT will join JR Motorsports with driver, Justin Allgaier, for the 2016 NASCAR Xfinity (NXS) Series season. Allgaier will pilot Read More
CHS Building exterior
CropLife 100CHS Leaders Help Shape Succession Report
October 22, 2015
Succession planning was listed as a main concern of cooperative leaders at this summer’s 15 regional CHS owner town hall Read More
Fall Harvest
CropLife 100Pinnacle Purchases Eight Regional Seed Companies
October 12, 2015
Pinnacle Agriculture Holdings has announced the purchase of eight regional seed companies to advance its seed business. Pinnacle has acquired: Read More
MRM Agricultural Service
CropLife 100Pinnacle Acquires CropLife 100 Ag Retailer
October 8, 2015
Pinnacle Agriculture Holdings, LLC has successfully acquired the Missouri-based agronomy business of MRM Agricultural Service, LLC and its affiliates (MRM). Operating Read More
Eric Jenks, Wilbur-Ellis
CropLife 100Wilbur-Ellis Opens Dry Fertilizer Storage And Blending Facility In Washington
October 8, 2015
Wilbur-Ellis Co., ranked No. 4 on the CropLife 100, has constructed and opened a 22,000-ton dry fertilizer storage and blending Read More
Latest News
HerbicidesBREAKING: EPA Pulls Registration On Dow’s Enlist …
November 25, 2015
EPA on Wednesday withdrew approval of a controversial new weed killer to be used on genetically modified corn and soybeans, Read More
FertilizerYara Tampa Ammonia Terminal Garners ResponsibleAg Honor…
November 25, 2015
Yara has received its first ResponsibleAg Certification for its Tampa, FL, Ammonia terminal location. This achievement demonstrates Yara’s commitment to Read More
ManagementReviewing The Top Ag Stories For 2015
November 24, 2015
Editors Eric Sfiligoj and Paul Schrimpf discuss the most noteworthy events from this past year in agriculture. Read More
EmployeesAgriculture Jobs May Be Plentiful, But New Grads Are Sc…
November 24, 2015
Close to 60,000 jobs are set to open up in agriculture each year for the next five years, but there's not enough grads to fill them. Read More
Radish cover crop
StewardshipCover Crops Guide Helps Growers Improve Water Quality
November 23, 2015
A publication that teaches growers the advantages of using cover crops to improve soil health and crop yields has won Read More
Crop InputsThe Andersons’ Products Receive California Organi…
November 23, 2015
The Plant Nutrient Group of The Andersons, Inc. announced today that its Humic DG and Black Gypsum DG products are Read More
Eric SfiligojNew European Study Seems To Support Glyphosate Safety
November 23, 2015
Looking at any international news over the past few years, it might seem as if the European Union (EU) is Read More
Toggle Biostimulant corn roots
Crop InputsTwo New Biostimulants Added To United Suppliers’ …
November 20, 2015
Winfield US announces the launch of two new products in the United Suppliers portfolio for the 2016 crop season, Optify Read More
StewardshipNRDC Report: Cover Crops Contain Vast Benefits
November 19, 2015
As harvest season ends and farmers in the United States ready themselves for winter, one small change could make a Read More
Fall Harvest
Seed/BiotechArysta Launches New Seed Protectant
November 19, 2015
As spring wheat growers begin planning for a strong start to their season, Arysta LifeScience North America announces RANCONA V Read More
Crop InputsInocucor Receives U.S. Patent For Microbials
November 19, 2015
Inocucor Technologies Inc., the Montreal-based agriculture biotech company, was issued patent No. 9,175,258 by the U.S. Patent and Trademark Office to protect Read More
ManagementSyngenta Rumors and ARA 2015 Preview
November 19, 2015
CropLife Editor Eric Sfiligoj looks at the latest rumors involving Syngenta selling its crop protection business and talks about events Read More
EquipmentAGCO Announces Finalists For Operator Of The Year Honor
November 19, 2015
AGCO Corp. has announced the four top operators chosen as finalists for AGCO’s 10th Annual Operator of the Year program, Read More
High Plains Aquifer
StewardshipStudy: High Plains Aquifer Overall Usage In Decline
November 18, 2015
A new Kansas State University study finds that the over-tapping of the High Plains Aquifer’s groundwater beyond the aquifer’s recharge Read More
Golden Harvest Corn healthy leaves
FungicidesArysta Launches New Corn And Soybean Fungicide
November 17, 2015
Arysta LifeScience North America has recently launched ZOLERA FX Fungicide. The highly systemic, powerful fungicide delivers broad-spectrum disease control with Read More
Young corn plants in soil
Crop InputsBioAg Alliance: Microbials Targeted For 250-500 million…
November 17, 2015
Monsanto and Novozymes have announced a new 2025 acreage target that will guide the companies’ microbials business for the next Read More
Syngenta Sign
Crop InputsSyngenta Still Being Eyed For China Takeover
November 16, 2015
China National Chemical Corp. approached sovereign wealth funds including China Investment Corp. to help pay for a potential acquisition of Read More
Cedar Country Cooperative
Eric SfiligojCooperative Consolidation Continues
November 16, 2015
As I put this enewsletter column together, we’ve just put the finishing touches on our magazine’s annual CropLife 100 report. Read More