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

Crop InputsLand O’Lakes Announces Minnesota Water Quality Partnership
May 25, 2016
Governor Mark Dayton and Land O’Lakes, Inc. President and CEO Chris Policinski today announced a new public-private partnership to protect Read More
Crop Inputs2013 West Texas Tragedy Ruled A ‘Criminal Act’ [Updated]
May 11, 2016
A 2013 fertilizer plant blast in West, TX, that killed 15 people and injured 160 others was caused by a Read More
Young Corn Field
Crop NutritionEnhancing In-Season Nitrogen Use Efficiency Is In The Details
May 5, 2016
Spring is here and crops are in the ground. Do you have a plan for your nitrogen during the growing Read More
Truck dumping dry fertilizer
FertilizerFertilizer Logistics Q&A: Southern States’ Joe Wlodkoski
May 2, 2016
Joe Wlodkoski, Director of Agronomy Procurement, Fertilizer, Southern States Cooperative, is a 40-plus year fertilizer industry veteran. He is quite Read More
Trending Articles
Eric SfiligojPity The Monsanto Haters
May 23, 2016
An old saying goes thus: “Be careful what you wish for. You just might get it.” Given current events, there Read More
Monsanto Luling Plant
Crop InputsReport: Bayer Eyeing Monsanto For Possible Mega-Merger
May 16, 2016
Bayer AG is exploring a potential bid for U.S. competitor Monsanto Co. in a deal that would create the world’s Read More
Aerial Drone
Precision AgA Deeper Dive Into The Future Of Precision Ag
May 9, 2016
For about two decades now, through the good and the bad times, the ups and the downs inherent in agriculture, Read More
Palmer amaranth in soybean stubble
HerbicidesWSSA: Billions In Potential Economic Losses From Uncontrolled Weeds
May 4, 2016
What losses would corn and soybean growers experience if they were forced to eliminate herbicides and other control techniques from Read More
Eric SfiligojReasons For Hope In Commodity Prices
May 2, 2016
For many months now, the doomsayers have ruled the day in agriculture. Too much supply with too little demand would Read More
Eric SfiligojMissing The Family Ties In Agriculture
April 25, 2016
By its nature, the agriculture market is cyclical. Up and down cycles come and go with a regular pattern. For Read More
Latest News
Crop InputsLand O’Lakes Announces Minnesota Water Quality Pa…
May 25, 2016
Governor Mark Dayton and Land O’Lakes, Inc. President and CEO Chris Policinski today announced a new public-private partnership to protect Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Corn close up
Crop InputsArysta LifeScience Establishes Global Headquarters In R…
May 25, 2016
Arysta LifeScience has announced plans to relocate its global headquarters from West Palm Beach, FL, to Cary, NC, over the Read More
fertilizer blending and storage, Top 100
BlendersCHS Dakota Expansion Features AGCO’s GSI InterSys…
May 25, 2016
The continued growth of precision agriculture has increased farmer use of customized fertilizer blends best-suited for their soil conditions. Several Read More
ManagementAgriculture 3.5: A Bumpy Road Ahead
May 24, 2016
You may have read my article a few years ago on Agriculture 3.0, which is a term I coined to Read More
Topcon’s X30 display with CropSpec sensors
EquipmentGPS Autosteer Systems: Product Updates From Precision A…
May 24, 2016
Throughout 2015 GPS Steering solutions continued to evolve from what was once an after-market add on, to today’s cab where Read More
Trimble TMX-2050 In-Cab Display
Eric SfiligojThe Precision Ag Revolution Continues
May 24, 2016
It’s funny how much “the first time” tends to mean to someone as they get older. I sometimes can’t recall Read More
Eric Wintemute, AMVAC
Precision AgAMVAC Ups The Ante With New Precision Ag Technology
May 24, 2016
A potentially industry-changing at-plant soil treatment system from American Vanguard Corp., or AMVAC, is coming soon to large growers in Read More
Dry and Liquid Plant
CropLife 100CropLife 100 Map
May 24, 2016
The new CropLife 100 map shows the locations of each of the headquarters of the 2015 CropLife 100 retailers. The interactive Read More
Southern States Cooperative
Corn Field
Industry NewsTiger-Sul Names Veteran Account Manager To Lead Central…
May 23, 2016
With the continuing growth of the sulphur bentonite and precision crop nutrient industry, global agriculture firm H.J. Baker has announced that Read More
Bayer sign
Industry NewsReuters: Bayer Defies Critics With $62 Billion Monsanto…
May 23, 2016
German drugs and crop chemicals group Bayer has offered to buy U.S. seeds company Monsanto for $62 billion in cash, Read More
Eric SfiligojPity The Monsanto Haters
May 23, 2016
An old saying goes thus: “Be careful what you wish for. You just might get it.” Given current events, there Read More
Industry NewsCompass Minerals Hires Industry Veteran To Lead Plant N…
May 19, 2016
Compass Minerals has hired plant nutrition industry veteran Vatren Jurin to steer the company’s portfolio expansion into specialty liquid micronutrient Read More
ASMARK Retailers LIVE! Tour 2016 Group shot The Andersons
CropLife 100The Andersons Rejects Unsolicited Proposal From HC2
May 19, 2016
The Andersons, Inc. has announced that its Board of Directors has rejected two non-binding, highly conditional, unsolicited proposals from HC2 Read More
glyphosate
Crop InputsWHO: Glyphosate ‘Unlikely’ To Cause Cancer
May 16, 2016
Via Reuters.com reporter Kate Kelland: The weed-killing pesticide glyphosate, made by Monsanto and widely used in agriculture and by gardeners, Read More
dicamba, Roundup Ready 2 Xtend
Crop InputsASA: No Dicamba On Roundup Ready 2 Xtend In 2016
May 16, 2016
While Roundup Ready 2 Xtend (RR2X) are tolerant to dicamba and glyphosate herbicides, no dicamba herbicides will be approved for Read More
CPP, glyphosate, dicamba, atrazine,
Crop InputsReport: Congress Pressing EPA On Glyphosate Review Hand…
May 16, 2016
Via Reuters.com reporter P.J. Huffstutter: U.S. lawmakers have asked EPA to explain why it published – and then withdrew – Read More