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

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
FertilizerOSHA Hammers West Fertilizer With Over $100K In Fines For April Explosion
October 10, 2013
The Occupational Safety and Health Administration is fining the parent company of the West Fertilizer plant, Adair Grain Inc., $118,300 for 24 violations. Read More

Trending Articles

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
HerbicidesScouting Key To Next Season’s Soybean Herbicide Program
August 12, 2014
When growing soybeans, growers need to think ahead to stay one step ahead of weeds. That means examining weed threats and evaluating which herbicides work best. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
CropLife 100BRANDT Acquires Lemon Ag Services
August 4, 2014
The acquisition of Lemon Ag fits BRANDT’s aggressive corporate strategy of providing superior agronomic advice and services for customers in central Illinois. Read More
Eric SfiligojThe Resurgence Of Crop Protection
August 4, 2014
Plenty of new offerings over the next few years should see a rebirth for the crop protection products category in terms of market share. Read More

Latest News

Crop InputsBASF Is Betting On A Bright Agricultural Future
September 1, 2014
The crop protection products giant is gearing up for a busy time in agriculture by investing in both product production and development over the next couple of years. Read More
Eric SfiligojAn Erie Feeling For Ag
September 1, 2014
Plenty of water issues have been in the news lately, including the continuing drought in California. Read More
CropLife 100Pinnacle Acquires California-Based Retailer
August 29, 2014
Pinnacle Agriculture Holdings will acquire Kerman Ag Resources, Inc., which will operate under Pinnacle's Performance Agriculture brand. Read More
Allied Cooperative Grain Plant
ManagementArcadia Co-op To Merge With Allied Cooperative
August 28, 2014
Allied Cooperative has announced that members of Arcadia Co-op voted in favor of a merger with Allied Cooperative, paving the way for the consolidation which will be effective on December 1, 2014. Read More
InsecticidesBioinsecticide VENERATE Now Registered In California
August 27, 2014
Marrone Bio Innovations' VENERATE is a new tool to help California growers control crop-damaging insect pests, fight the development of insect resistance and reduce pesticide residues on fruits and vegetables. Read More
CropLife 100Two Iowa-Based Ag Co-ops To Merge
August 27, 2014
The Board of Directors and management of United Western Coop, Missouri Valley, IA has completed a merger with Heartland Co-op, West Des Moines, IA, effective September 1, 2014. Read More
FertilizerKoch Expands AGROTAIN Nitrogen Stabilizer Portfolio
August 26, 2014
Koch Agronomic Services, LLC has added two new innovative nitrogen stabilizers to the AGROTAIN product family – AGROTAIN ADVANCED and AGROTAIN DRI-­MAXX. Read More
Seed/BiotechDuPont To Build Two Seed Treatment Centers
August 26, 2014
DuPont has announced construction on two state-of-the-art centers dedicated to developing and testing seed treatment formulations, applications and seed handling techniques in an important step toward bringing new solutions to growers. Read More
Seed/BiotechLoveland Products Acquires A Controlling Interest In Ag…
August 26, 2014
Loveland Products, a subsidiary of Agrium , has announced the company has acquired a controlling interest in Agricen, a Dallas-area agricultural biotechnology company delivering biochemical-based products for efficient and sustainable plant nutrition. Read More
StewardshipUp Close Look At The 2014 Environmental Respect Award W…
August 25, 2014
The 2014 Environmental Respect Award winners were honored recently at the 24th annual event in Wilmington, DE. Read More
Eric SfiligojAg Science Rejection Carries Consequences
August 25, 2014
As innuendo and fear dog the regulatory process, agriculture can’t get the new tools it needs to combat world hunger. Read More
LegislationFarmers Dismayed As New Farm Bill Dumps Direct Payments
August 25, 2014
The threatened end of cash subsidies to the nation’s row crop farmers dates back through at least the last two iterations of national agriculture policy legislation. 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
CropLife 100GROWMARK CEO To Retire
August 22, 2014
GROWMARK chief executive officer Jeff Solberg has announced his retirement effective September 15, 2014. Read More
InsecticidesDuPont’s Prevathon Approved For Dry Beans
August 22, 2014
DuPont Prevathon insect control powered by Rynaxypyr has received EPA registration for foliar use on dry bean crops, including dried shelled peas and beans. Read More
ManagementNCGA DuPont New Leaders Program Enters Sophmore Season
August 20, 2014
The National Corn Growers Association and DuPont are pleased to announce the second year of the NCGA DuPont New Leaders Program. Read More
FungicidesVerdesian Links Up With Mitsui, Hokusan
August 20, 2014
Mitsui Chemicals Agro, Inc., and Hokusan Co., announced the signing of an exclusive licensing agreement allowing Verdesian Life Sciences global access to its patented technology for suppressing mycotoxin contamination in wheat and barley. Read More
SprayersUniversity Of Illinois Introduces New Spray App
August 18, 2014
University of Illinois Extension has released a new smartphone app for making sprayer-related calculations. Pesticide Spray Calculator, or Spray Calc, Read More