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

FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
Aerial view of the West Fertilizer explosion site
FertilizerFertilizer Companies Blame City For West, TX, Explosion
August 6, 2014
El Dorado Chemical Co. and CF Industries contend the city failed to properly train the first responders and had insufficient protocols in place to battle the April 17, 2013, blaze at West Fertilizer Co. that triggered the explosion. Read More
FertilizerThe Fertilizer Institute: New President, Renewed Energy
February 3, 2014
Chris Jahn relishes the opportunity to lead the organization through the challenging times ahead. Read More
FertilizerA New Cycle For Fertilizer Demand
January 2, 2014
Changes in the corn market could have a major impact on the crop nutrients sector in 2014, say experts. Read More

Trending Articles

CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More
EquipmentNew Holland Acquires Miller-St. Nazianz
September 3, 2014
The assets of Miller acquired as part of the transaction will become part of New Holland Agriculture, a CNH Industrial brand, building on a successful four-year partnership between the two companies. Read More
CropLife 100Pinnacle Acquires East Kansas Chemical
September 2, 2014
Ranked 82nd on the CropLife 100, East Kansas Chemical will operate as part of Pinnacle's Performance Agriculture brand. Read More
MAGIE 2014 ShowStopper
EquipmentJohn Deere Again Wins MAGIE ShowStopper Award
August 25, 2014
For the second consecutive year, John Deere was honored at the Midwest AG Industries Exposition (MAGIE) for its new R4045 sprayer. Read More
ManagementExpert To Discuss Farmland Value, Rent At Farm Science Review
August 18, 2014
While cropland values in Ohio increased in the past two years, they have remained flat in 2014, declining in some cases, according to an Ohio State University agricultural economist. Read More
EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More

Latest News

CropLife 100Pinnacle Acquires Kansas-Based Cedar Ridge Supply
September 16, 2014
Cedar Ridge Supply will operate as part of Pinnacle's Performance Agriculture brand. Read More
StewardshipSecretary Vilsack Highlights Innovative Conservation Ef…
September 15, 2014
Nearly $16 million in Conservation Innovation Grants (CIGs) will be awarded to 47 organizations to help develop cutting-edge ideas to accelerate innovation in private lands conservation. Read More
Seed/BiotechSyngenta Responds To Cargill Lawsuit
September 15, 2014
Syngenta believes that the lawsuit is without merit and strongly upholds the right of growers to have access to approved new technologies. Read More
Equipment2014 Farm Science Review Launches Mobile App
September 15, 2014
Smartphone and tablet users planning on attending the 2014 Farm Science Review can now download this year’s customized mobile application. Read More
CropLife 100Southern States Coop Grower Sets Georgia Soybean Yield …
September 15, 2014
Georgia farmer Randy Dowdy's soybeans yielded an astonishing 110.66 bushels per acre, crushing the previous record of 82 bushels-per-acre. Read More
NIMITZ Treated vs Untreated pepper plant
InsecticidesNIMITZ Nematicide Approved By EPA
September 12, 2014
NIMITZ is a novel, non-fumigant nematicide with simplified application features, user safety and an active ingredient with a unique mode of action. Read More
InsecticidesMarrone Bio Innovations Receives Patent For Chromobacte…
September 11, 2014
The patent is the first step for MBI in developing a commercially viable product to inhibit infestations of corn rootworm larvae across America and other regions. Read More
HerbicidesDow AgroSciences: Keeping The Pipeline Stocked
September 11, 2014
Dow AgroSciences is embracing product diversity to drive the company’s future. Read More
CropLife 100CHS Is Official Partner Of New St. Paul Ballpark
September 10, 2014
The new ballpark in St. Paul, MN, officially became CHS Field with Twin Cities-based CHS Inc. revealed as the naming rights partner. Read More
EquipmentHagie Honors Farming Stewardship Leaders
September 10, 2014
The Iowa Farm Environmental Leader award recognizes Iowa farmers as environmental leaders that are committed to healthy soils and improved water quality. Read More
Precision AgPlantBeat: Your Plants’ Pulse In The Palm Of Your Han…
September 10, 2014
A new agronomic monitoring and recommendation service from Phytech could rewrite the book on real-time plant health status monitoring. Read More
StewardshipCCAs Making Headway With 4R Program In Lake Erie Wester…
September 9, 2014
Certified Crop Advisers are implementing the 4R Nutrient Stewardship Certification program in Lake Erie's Western Basin to improve water quality. Read More
MicronutrientsMicronutrients Going Macro
September 9, 2014
Between 2014’s fantastic growing conditions and a heightened awareness on plant nutrition, the major players in micronutrients are gearing up for another big year. Read More
Crop InputsFMC Announces Cheminova Takeover
September 8, 2014
FMC Corporation today announced that it has signed a definitive agreement to acquire Cheminova, a wholly owned subsidiary of Auriga Industries. Read More
HerbicidesValent’s Fierce XLT Herbicide Receives EPA Approv…
September 8, 2014
Valent U.S.A. Corp. announced today that Fierce XLT Soybean Herbicide is now federally registered for preemergence weed control in soybeans Read More
Eric SfiligojIndustry Consolidation Set To Increase Going Forward
September 8, 2014
As the agricultural marketplace moves into fall, one observer predicts the pace of consolidation will grow at all levels. Read More
LegislationCropLife America Leaders Address Regulatory Landscape, …
September 8, 2014
As CropLife America enters its 81st year, the organization’s leaders have seen another period of rapid and visible policy and public issue activity. Read More
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More