Fertilizer: The Economic Downturn

The economic downturn slowed the global GDP -1.1% in 2009, tapered U.S. output to -2.7%, and disrupted the normal smooth flow of fertilizer from producers through the distribution chain to growers.

Beginning with the onset of the downturn, growers around the world reduced their fertilizer applications. Recognizing that nitrogen is not banked in the soil from one year to the next at significant levels, they trimmed this nutrient the least. For the period including the fall 2008 and spring 2009, global nitrogen applications were 2% below those in the preceding fall/spring period.

For phosphate and potash, many growers chose to substantially cut applications, relying on nutrients resident in the soil bank to feed the new crop. Global phosphate applications dropped 10% year-over-year, while potash applications fell 18%.

Some individual markets were affected to a greater degree. In the U.S., comparing the period including fall 2008 and spring 2009 to the previous fall and spring, nitrogen applications were down 10%, phosphate dropped 30%, and potash plunged 40%.

What Happened To The Food Crisis?

Although the food shortages and accompanying riots that were experienced in many countries around the world in early 2008 were pushed out of the news by the onset of The Great Recession, they have not been forgotten.

“For the first time in history, more than one billion people are undernourished worldwide,” said Jacques Diouf, director-general of the United Nations Food and Agriculture Organization. “The recent downward adjustment (in the economy) should not be interpreted as the end of the food crisis.”

What impact will the nutrient cutbacks have on the world’s food supply?

Before any harvest information was available, the response to this question from the International Plant Nutrition Institute was this: “There isn’t a simple answer. The impact of the cutbacks on crop yields depends on a complex interplay of many factors. These include soil nutrient test levels, along with stress on the crops from weather, insects, and disease. Crop genetics and site-specific factors may aggravate or reduce the impact.”

Work carried out at Purdue Univer­sity assigns probabilities to the potential outcomes of fertilizing soils tested as having various levels of residual nutrients.

Soils tested as having a very high residual nutrient level provide both a low probability and a low magnitude for crops to achieve a yield increase. Both the probability and magnitude of a yield response are projected to be less than 5%. As soil tests indicate progressively lower nutrient levels, the probability of achieving a yield response becomes higher, and the magnitude of the increase also grows. For soils testing very low in nutrient content, the probability of a yield response rises to over 80%, and the magnitude of the response climbs to 50%.

The interplay of the different factors that affect the growing crop means that the impact of the fertilizer cutbacks on the food supply also depends on how deeply the crops are stressed by their growing conditions.

Harvests from the crops planted in the Southern Hemisphere in fall 2008 and from crops planted in the Northern Hemisphere in spring 2009 provided the answer, which matched expectations.

Crop yields in the areas of the world that experienced weather stress declined significantly from yields obtained from the previous harvest. In a couple areas where either excellent or substantially improved growing conditions were experienced, an improvement in crop yields was attained.

Soybean yields in Brazil and Ar­gentina, stressed by drought, were reduced 8% and 29%, respectively.

Wheat yields rose 5% in Australia, where more normal weather followed the extreme drought of the previous year. Declines in wheat yields occurred in several countries: Ukraine -19%, Russia -13%, EU-27 -4%, and Canada -4%.

In India, a late, severe monsoon season partly fueled a 4% decline in the rice yield.

Corn yields in the U.S., boosted by very favorable growing weather, rose 6%, while yields in China, with dry conditions, saw a 7% drop.

What Global Indicators Say

While the jury is still out on the response by growers to these results from the recent global harvests, several of the indicators to watch that affect this decision support a return to normal fertilization.

While lower than the levels immediately prior to the global recession, projected global economic growth for 2010 remains buoyant. In its October 2009 prediction of economic growth, the International Monetary Fund projected the global economy to achieve a 3.1% improvement in 2010, similar to the 3.2% long-term average.

Growth for the U.S. economy was forecast to be 1.5%, which compares to the 2% average for the period 1999 to 2009.

Futures prices on the Chicago Mercantile Exchange for crops such as wheat, corn, and soybeans are significantly above the 10-year average, and grower economics reflect this.

Prices for several other commodities, including sugar, rice, coffee, bananas, and palm oil are also well above the 10-year average.

The cost of fertilizer as a percentage of crop revenue is favorable for crops around the world.

Most growers have seen clear evidence that soils with good nutrient levels provide their best chance of achieving good harvests in the face of the many potential crop stressors.

The withdrawal of nutrients from the world’s soil banks by the crops harvested since the second half of 2008 are not sustainable. They must be replaced.

The recent response of growers in the U.S. Midwest may provide the best look into the future. The U.S. corn crop matured late in the year, pushing back the fall fertilizer application season and with it, the opportunity to have an early peek at growers’ reaction to the market conditions. However, once the crop had been taken off, all fertilizers moved briskly through the supply chain and into the soil. The fall season in this part of the world, which had been slow waiting for the bare soil needed to apply nutrients, quickly turned into a shortened period of excellent applications.

The Road Back To Normalcy

Inventory destocking is a standard feature of recessionary periods. For the global fertilizer industry, non-producer inventories, both in the bins and in the soil bank, have been mostly destocked around the world and need to be refilled.

For the global fertilizer markets in the first half of 2010, normal to strong movement is expected for product to flow from producers through the supply chain and into the soils in the U.S. and around the world.

A temporary change in fertilizer inventory management practices accompanied the economic downturn. Retailers revised their normal inven­tory min-max levels sharply downward, moving to just-in-time inventory management and looking to the producer to carry the inventory. These lower inventories at the farm supply level may lead to a spring season during which the need to quickly move product into position will pose a major challenge to the supply chain.

While the outlook is for a normal to strong spring season, logistical challenges may limit the amount of fertilizer that can be applied.

Encouraging signs for the economy, crop prices, and fertilizer markets indicate the world is poised for a return to the normal business of maximizing food production.

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
EquipmentCase Unveils 2000 Series Early Riser Planter At NFMS
February 10, 2016
Case IH revealed the all-new 2000 Series Early Riser planter to media and attendees at the opening of the National Read More
Syngenta Sign
Crop InputsSyngenta: Keep Ag In Mind During Election Season
February 10, 2016
As presidential candidates stake out their 2016 election platforms and key priorities, growers and their business partners should seek opportunities Read More
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