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
Top 100 Articles
CropLife 100BRANDT Commemorates National Ag Day
March 20, 2015
The Illinois agriculture community gathered at BRANDT global headquarters on March 18 to celebrate National Ag Day behind this year's theme Sustaining Future Generations. Read More
Wheat Growers, North Central Farmers Elevator Pursue Merger
CropLife 100Wheat Growers, North Central Farmers Elevator Pursue Merger
March 3, 2015
Two CropLife 100 retailers — South Dakota Wheat Growers (ranked No. 11) and North Central Farmers Elevator (No. 19) — have entered into a Letter of Intent to unify the two companies into a newly named cooperative. Read More
Growmark Group
CropLife 100GROWMARK In 2015: Back, To The Future
March 2, 2015
The nation’s third largest ag retail organization is simultaneously moving forward while remembering its past. Read More
CropLife 100Pinnacle Expands Sanders Brand In The South
February 27, 2015
Pinnacle has acquired Hopkins Seed and Chemical in Qulin, MO, which expands the company's Sanders brand to nine Southern states. Read More
CropLife 100Pinnacle Launches New Providence Agriculture Location In Indiana
February 27, 2015
Pinnacle Agriculture Holdings — ranked No. 6 on the CropLife 100 — has established a new retail location in New Castle, IN, which will operate as part of Pinnacle's Providence Agriculture brand. Read More
Carl Casale of CHS
CropLife 100Cooperative CHS Returns $518 Million To Owners
February 23, 2015
The 2015 cash return to owners is based on CHS net income of $1.1 billion, the company's second highest on record. Read More
Latest News
Crop InputsSyngenta Louisiana Plant Poised For 2015 Production
March 26, 2015
As the 2015 planting season gets underway, growers across the country will need crop protection products to combat pests and Read More
Lake Erie Nutrient Stewardship
LegislationOhio Lawmakers Finalize Phosphorus Restrictions
March 25, 2015
State lawmakers on Wednesday finalized new rules designed to curb toxic algal blooms on Lake Erie, calling the regulations a major step forward in addressing the problem. Read More
Spreaders17 Fertilizer Spreaders For 2015
March 25, 2015
Manufacturers shoot for versatility and accuracy in this year's crop of fertilizer spreaders. Read More
Industry NewsMonty’s Hires Mid-South Product Consultant
March 25, 2015
Monty's Plant Food Co. has hired Matt Woodring as a Product Consultant for portions of Central Kentucky and Tennessee.    Read More
StewardshipMapShots Integrates With DriftWatch
March 23, 2015
Growers and agricultural providers using AgStudio FARM and AgStudio PRO can now view vital information about specialty crops and apiaries through a recent integration with the DriftWatch Specialty Crop Site Registry from FieldWatch, Inc. Read More
Crop InputsWorld Health Organization Report Contradicts Scientific…
March 23, 2015
A new report from the World Health Organization has classified glyphosate with a “2A” rating as a probable carcinogen, a Read More
Eric SfiligojSeed Treatment Stays Necessary
March 20, 2015
Grower-customers looking to scale back spending in 2015 won’t consider seed treatment, say experts. Read More
HerbicidesMARCH MADNESS: Industry Rallies Around Glyphosate Safet…
March 20, 2015
A newly published report from the International Agency for Research on Cancer (IARC) classifies the herbicide glyphosate as a "2A-rated possible carcinogen" and the ag industry responds by circling the wagons. Read More
ManagementRetail Week: Precision survey, a technology acquisition…
March 20, 2015
Editors Paul Schrimpf and Eric Sflilgoj discuss recent travel, the upcoming precision adoption survey, and an unusual sighting at a Read More
CropLife 100BRANDT Commemorates National Ag Day
March 20, 2015
The Illinois agriculture community gathered at BRANDT global headquarters on March 18 to celebrate National Ag Day behind this year's theme Sustaining Future Generations. Read More
Crop InputsBioSafe Launching TerraGrow Soil Inoculant
March 20, 2015
TerraGrow is a blend of beneficial bacterial and fungal spores and nutrients carefully designed to promote healthier soil and crops. Read More
Winter Wheat
AdjuvantsMax Systems Debuts New Adjuvant NanoRevolution 2.0
March 18, 2015
Added to a tank mix of glyphosate at the conservative rate of two to four ounces per acre, NanoRevolution 2.0 has proven effective in killing resistant weed species that had already had up to two applications of the leading glyphosate product. Read More
Photo credit: United Soybean Board/the Soybean Checkoff
Seed/BiotechAgnition Launches Microbial Catalyst Seed Treatment
March 18, 2015
Agnition it has launched Commence for Soybeans, a microbial catalyst seed treatment for soybeans that stimulates microbial activity for healthier soil and a superior growth environment. Read More
4R Certified, Nutrient Stewardship Council,
StewardshipTyler Grain & Fertilizer Now 4R Certified
March 18, 2015
The 4R Nutrient Stewardship Certification Program has announced Tyler Grain & Fertilizer Co. in Smithville, OH, has been added to Read More
V.R. "Swede" Roskam
ManagementFormer MACA President V.R. ‘Swede’ Roskam P…
March 17, 2015
Former Mid America CropLife Association President V.R. “Swede” Roskam died unexpectedly in Wheaton, IL, on March 13, 2015 at the age of 85. Read More
corn field
Industry NewsNovaSource Announces Organizational Changes
March 17, 2015
Bob Gestring has accepted the position of Director of Sales, North America and Kyle Coleman has accepted a promotion to the role of Marketing Director, North America. Read More
Chuck Gates, Ohio CCA of the Year
ManagementOABA Honors 2015 Certified Crop Adviser Of The Year
March 16, 2015
Chuck Gates, of Tiffin, OH, has been named the 2015 Certified Crop Adviser of the Year by the Ohio Certified Crop Adviser Board and will receive $1,500 provided by DuPont Pioneer. Read More
Bee on a Sedum
StewardshipNew Bayer Bee Initiative To Provide Pollinators With Ne…
March 16, 2015
Bayer CropScience is launching Feed a Bee, a major initiative to increase forage for honey bees and other pollinators, including growing 50 million flowers and providing additional forage acreage in 2015. Read More