Fertilizer: Some Promising Signs

In 2010, the fertilizer marketplace recovered much of the ground it lost in 2008 and 2009 — both figuratively and literally. According to figures compiled in the CropLife 100 ag retailers survey, fertilizer sales topped $10.1 billion for the year, an increase of 10%. Naturally, the question everyone in the industry is asking is if the market can build upon these gains in 2011.

So far, the signs look good. According to Joe Dillier, director of plant food for GROWMARK, Bloomington, IL, ag retailers saw a big fall fertility push this past year, and early indications are this will be followed by an equally busy spring. “If you look at the amount of corn acreage expected and how little fertilizer was applied during the late part of 2009, I would say things are looking very positive,” says Dillier.

As always, he adds, supply and price could be an issue if fertilizer becomes hard to obtain and more expensive to use. “Price is always difficult to predict, but right now, it’s not an issue for buyers,” says Dillier.

A Supplier’s View

In addition to ag retailers, fertilizer producers are also positive for the prospects for 2011. Recently, CropLife® magazine conducted an interview with Al Mulhall, senior director, market research, Potash Corp. of Saskatchewan (PotashCorp) looking at the outlook for fertilizer demand in 2011.

Q: What was the effect of the 2008-09 period on global fertilizer sales, applications and production?
In the 2008-09 period, growers and fertilizer dealers around the world reduced fertilizer inventories. Growers continued to plant and grow crops, but cut their fertilizer applications, drawing down stored nutrients in the soil. Fertilizer dealers continued to sell products to meet the diminished demand, but trimmed their purchases from producers, dropping their stock levels. In many cases, dealer inventories were reduced almost to the floor and product was obtained only as needed to meet outgoing orders rather than on a replacement basis.

Nitrogen needs to be applied each year due to its limited storage in the soil, so during 2008 and 2009 annual growth in consumption of ammonia for fertilizer production was trimmed from the usual 2% or more to less than 1%. Industrial applications consume about one-fifth of the world’s ammonia and when the substantial cutbacks in industrial use are included, total ammonia consumption declined by an annual average of about 0.5% in 2008 and 2009.

For phosphate, the net effect globally from 2007 to 2009 was a 10% reduction in consumption of phosphoric acid, the key ingredient in production of both fertilizer and industrial products.

Potash shipments plunged by close to half from 2007 to 2009 — the largest decline in history.

As a result of the cutbacks in applications by growers, the reduced inventory levels by fertilizer dealers and producers’ lower production to accommodate these changes, soil nutrient levels fell and the fertilizer supply chain was depleted.

Q: Did these application cutbacks affect global crop production?
Experts in the crop nutrition field have indicated that lowering soil nutrient levels heightens the sensitivity of crops to stresses such as adverse weather conditions, insect pests and disease.

When growing conditions are ideal, the impact on crop yields of cutbacks such as those during 2008-09 may be minimal. However, significant yield reductions can be expected if any of these stressors are present.

India was an exception to the general global trend of fertilizer cutbacks in the 2008-09 period. In 2010, it continued to boost fertilizer applications and also had good weather. Its production of wheat and coarse grains was up 7%.

However, in a number of countries unfavorable weather affected production of grain (which includes wheat and coarse grains). Argentina’s planted area was up 20%, however, its production increase was less at 17%. In Canada, the wet spring of 2010 reduced production by 8% compared to the previous year. In the U.S., summer nights that were warmer than normal led to smaller than usual kernels at the tip of corn cobs, which played a major role in a 4% reduction in production. Brazil experienced dry conditions associated with La Niña and its production was down 7%. In the European Union, dry conditions contributed to a 6% shortfall. Drought in Ukraine led to a 13% loss of production. Russia experienced the worst drought in more than a century and its production plunged by 37%.

Q: How have these production shortfalls affected inventories?
For wheat, the global stocks-to-use ratio was reduced substantially to below average. The coarse grains stocks-to-use ratio plunged to equal the lowest level in the past 30 years.

In the US, the corn stocks-to-use ratio fell to 6%; only once in the last 45 years has it been lower, and then only slightly.

Q: What effect is the crop production shortfall having on global grain markets?
The shortfall in Russia resulted in a ban on exports in August of 2010 to ensure sufficient supplies for the Russian domestic market. When it became apparent that the drought would also limit planting of winter wheat, this ban was extended to at least June 2011. Concern over its limited grain supplies led Russia to ask Ukraine to restrict grain exports to the rest of the world to allow Russian access to this product. Grain markets have tightened substantially.

Q: How is the supply/demand balance for other global crops? Has this changed recently?
The market for many commodity crops, including sugar, coffee, cotton, palm oil, bananas and soybeans, was already tight by May 2010 with prices 30% to 75% above the 10-year average. The booming global market for grains has escalated the battle for acreage to plant crops, requiring strong prices to defend against conversion of these acres to alternative crops and contributing to the recent additional tightening of commodity crop markets. Recently, these prices have been in the range of 50% to 170% above their 10-year averages.

Q: What kind of response to the strong crop prices are we seeing from growers? 
Strong crop prices have provided growers with the incentive to boost production, mainly by increasing fertilizer consumption on land farmed last year. Some small additions are expected to acreage in production around the world, which will also require more fertilizer.

Q: How is the fertilizer pipeline expected to respond to this increase in demand?
Earlier, we discussed the way the reductions in fertilizer demand in 2008 and 2009 lowered fertilizer stocks in the soil and in the distribution pipeline.

For nitrogen products, the growth in demand for ammonia and its derivatives is expected to be about 5% for the just-completed 2010 year and is projected to exceed 3% in 2011 as the manufacture of industrial goods and global crop production shift into a higher gear. Some nitrogen projects planned to provide new capacity were moved to the back burner during the downturn so limited new production is available, and the market is projected to continue tight through the spring season of 2011.

Industry consultants have estimated a strong increase in demand for the key phosphate fertilizer ingredient, phosphoric acid, of about 10% for 2010 followed by projections for a further 7% in 2011. As limited new production is expected in the short term, the phosphate market is also forecast to remain tight through the spring season.

For potash, we expect the final numbers will show 2010 global shipments were up more than 70% from 2009, from about 29 million tonnes to approximately 50 million tonnes. For 2011, we project a further increase in shipments of 10% to 20%, with demand in the range of 55-60 million tonnes. The lower end of this range is expected to meet immediate consumption needs, with the upper end including requirements as the world proceeds with replenishment of the depleted potash inventory. Our projections indicate demand in the area of 60 million tonnes would challenge the world’s potash operational capability, which we expect to be approximately 61 million tonnes in 2011. The balance between growing demand in the medium term and new capacity projected to come on stream are expected to maintain relatively tight markets.

Summing It All Up

The result of the rapid increase in shipments this year, says Mulhall, has been a generally tight supply-demand balance for fertilizer around the world. In the US, good planting weather in spring 2010 led to an early harvest followed by good movement of fertilizer to the fields. In many cases, dealers’ previously low inventories are now depleted with product going to the fields on a hand-to-mouth basis. Globally strong crop economics and tight fertilizer markets have set the stage for a potentially very brisk spring season.

“As we have seen very clearly this year, global weather conditions play a major role in the markets for both crops and fertilizer,” he says. “We expect another mixture of favorable and difficult weather this coming spring, and with continuing tight fertilizer markets, look forward to the challenge of helping to supply the US and the rest of the world with their fertilizer needs.”

Leave a Reply

Fertilizer Stories

FertilizerPhosphorus: Is Band Or Broadcast Application The Better Method?
February 3, 2016
Is band or broadcast application the better method when it comes to phosphorus? The answer to this question depends mostly Read More
Potash storage at Growmark
FertilizerThe Phosphate And Potash Outlook For 2016
February 2, 2016
Like other commodities, prices of the leading plant nutrient products dropped sharply in 2015. At this writing, the price of Read More
Young Corn Plants
FertilizerNutrient Considerations For Low Corn Prices
February 2, 2016
Corn prices are low and many producers are asking tough questions about their nutrient management programs. Here are some suggestions Read More
Granular urea from CF Industries urea plant in Donaldsonville, LA
FertilizerWhat’s In Store For Nitrogen In 2016
February 2, 2016
Supply is the overriding theme for the North American 2016 nitrogen outlook. In the last 12 months, global factors have Read More
Top 100 Articles
Elburn Cooperative
CropLife 100Elburn Cooperative Members Vote To Join CHS
December 28, 2015
With 81% of eligible producers voting, 94% cast an affirmative ballot for Elburn Cooperative, a diversified agricultural retailer based out Read More
West Central Cooperative, Jefferson, IA
CropLife 100Farmers Cooperative-West Central Merger Approved
December 21, 2015
The members of Farmers Cooperative Co. (FC), Ames, IA, and West Central Cooperative, Ralston, IA, have both approved the merger Read More
Wheat Growers Innovation Center, Bath, SD
CropLife 100Wheat Growers Opens Innovation Center
December 21, 2015
Wheat Growers’ commitment in providing its farmer-owners with the latest in technological advancements now has a one-of-a-kind focal point, as Read More
CropLife 100ARA Selects The Andersons As 2015 Retailer Of The Year
December 9, 2015
The Agricultural Retailers Association today named Maumee, OH-based The Andersons as its Retailer of the Year for 2015. The award Read More
CPS Washington Court House John Deere Sprayer
CropLife 100Application Equipment Report: It Is Easy Being Green For Top 100 Ag Retailers
December 5, 2015
On The Muppets television show, Kermit the Frog is famous for singing a song about the troubles he encounters in Read More
Fertilizer Bin
CropLife 100Fertilizer Sales: Another Down Year For Top 100 Ag Retailers
December 4, 2015
In pure number terms, the fertilizer category still dominates all crop inputs/services among CropLife 100 ag retailers. In 2015, for Read More
Latest News
Crop InputsMarrone Bio Innovations Submits New Bio-Fungicide For E…
February 9, 2016
Marrone Bio Innovations, Inc. (MBI) today announced that it has submitted a new biological fungicide (MBI-110) to EPA. The broad spectrum Read More
Crop InputsWeed Expert: Adding A Second Herbicide Not Always Easy
February 9, 2016
In my last post, I reviewed some recent research that suggests one of the best ways to delay the evolution Read More
Crop InputsGenetic Literacy Project: Farmers Need More Herbicide C…
February 9, 2016
There are two things that I think just about every weed scientist can agree on, writes Andrew Kniss for The Read More
HerbicidesWeed Expert Warns North Dakota Growers Of Coming Herbic…
February 9, 2016
Ford Baldwin painted a bleak picture of weed control at a recent workshop here exploring the future of ag production, Read More
HerbicidesWSSA Announces New, Updated Free Web Resources
February 9, 2016
Today the Weed Science Society of American (WSSA) announced that new and updated educational materials for both weed scientists and Read More
Soybean field
FungicidesFour Arysta Fungicide Formulations Given FIFRA Approval…
February 8, 2016
Arysta LifeScience North America recently announced the issuance of Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 2(ee) Recommendations for Read More
FungicidesAgri-Fos Systemic Fungicide Plus Receives EPA Registrat…
February 8, 2016
Vivid Life Sciences has announced the EPA registration of Agri-Fos Systemic Fungicide Plus, a highly concentrated active ingredient phosphite fungicide, Read More
Crop InputsBayer Contests EPA’s Decision On Valuable Insecticide F…
February 5, 2016
Crop Science, a division of Bayer, has announced it has refused a request by the Environmental Protection Agency (EPA) to Read More
Wheat Field North Dakota
Seed/BiotechSyngenta Wins Seed Fraud Suit Against South Dakota Grow…
February 5, 2016
Syngenta has obtained a $25,000 settlement from Paul and John Mayclin, Mayclin Farms, Plankinton, SD, in response to their Plant Read More
ManagementOABA Annual Conference Wraps Up In Columbus
February 5, 2016
More than 300 Ohio AgriBusiness Association (OABA) members and industry professionals were on hand to engage in collaborative learning and Read More
Crop InputsBayer To Contest EPA Flubendiamide Decision
February 5, 2016
Crop Science, a division of Bayer, announced today it has refused a request by EPA to voluntarily cancel the uses Read More
Syngenta
Seed/BiotechNot So Fast: ChemChina Syngenta Takeover Could Draw Nat…
February 5, 2016
State-owned China National Chemical Corp. (ChemChina), which plans to buy Swiss seeds and pesticide maker Syngenta, will promptly start preparations Read More
Rendering of Syngenta Seedcare Institute expansion
Seed/BiotechExpansion Of Syngenta’s North America Seedcare In…
February 4, 2016
As demand for seed treatment knowledge and products grows among farmers, retailers and others in the seed industry, Syngenta is Read More
Soybean Field
Industry NewsArysta LifeScience Strengthens Sales Team
February 4, 2016
Arysta LifeScience North America recently announced three new personnel additions: Jake Cook and Peter White are Territory Sales Managers for Read More
Davor Pisk Syngenta COO
Crop InputsSyngenta COO: Why ChemChina Offer Beat Monsanto’s
February 4, 2016
Syngenta Chief Operating Officer Davor Pisk says he is confident the proposed acquisition by ChemChina will ultimately help preserve choice Read More
Young corn plants in soil
Crop InputsKoch Biological Solutions Invests In Pathway Biologic
February 4, 2016
An affiliate of Koch Biological Solutions, LLC has acquired a minority equity position in, and entered into collaboration with, Pathway Read More
Crop InputsABG: China Signs Off On Monsanto’s Roundup Ready …
February 3, 2016
Monsanto Co. on Wednesday announced it plans to launch its Roundup Ready 2 Xtend soybeans in time for the 2016 Read More
Syngenta headquarters in Basel, Switzerland
Crop Inputs6 Things To Know About The ChemChina-Syngenta Deal
February 3, 2016
After months of rumors and speculation, Syngenta has announced that ChemChina has offered to acquire the Swiss-based company. “In making Read More