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

Tissue testing
FertilizerMosaic: 6 Tips For Better Crop Nutrition In Corn
August 16, 2016
Late in the crop season is a good time to assess visual nutrient deficiencies and ensure early- and mid-season deficiencies Read More
Soil
FertilizerSoil Health Experts Gain Ground On Standardized Measurements
August 11, 2016
Soil health experts from across North America plan to integrate more research projects to provide agricultural producers and policy makers Read More
Fertilizer5 Steps For Identifying Nutrient Deficiencies This Summer
August 8, 2016
As the summer growing season unfolds, the quest for ways to protect emerging crops is top of mind for many Read More
Mosaic CropNutrition Website
FertilizerCropNutrition.com Now Mobile Optimized
August 4, 2016
Growers across the globe continue to embrace bigger and better technology, and so too does The Mosaic Co. The ever-popular Read More
Trending Articles
Key Cooperative Marcus Construction Steel Building
Retail FacilitiesMarcus Construction Builds High-Speed Agronomy Center For Key Cooperative
July 7, 2016
Key Cooperative in Grinnell, IA, wanted a state-of-the-art Agronomy Center to better serve its customers. Marcus Construction delivered exactly that. Read More
Heritage Cooperative
Retail FacilitiesKahler Automation Designs State-Of-The-Art Facility For Heritage Cooperative
July 4, 2016
Heritage Cooperative in Marysville, OH, needed an efficient liquid, dry and grain facility to serve the many needs of their Read More
The Andersons Waterloo
ManagementFirst Indiana Facility Certified Under 4R Nutrient Stewardship Certification Program
June 27, 2016
The 4R Nutrient Stewardship Certification Program has announced that The Andersons, Inc.’s Waterloo, IN, facility has been added to its Read More
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To Explore IT Solutions
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
Monsanto Luling Plant
Eric SfiligojWhat’s Next For Monsanto?
May 31, 2016
For the folks at Monsanto’s headquarters in St. Louis, MO, it has been an eventful few weeks. Back on May 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
Latest News
ASMARK 2016 Retailers Live! Tour - CPS
CropLife 100CPS Acquires Texas Retail Operation
August 23, 2016
Crop Production Services (CPS) has acquired the assets of Larry’s Chemical and Spray, Inc., for an undisclosed amount in an Read More
PrecisionAg Video Conference
Precision AgVideo: PrecisionAg Vision Conference
August 22, 2016
A Strategic Conference Focused on the Future of Farm Digitization and Precision Agriculture Visit precisionagvision.com and register today! Read More
Young Corn Plants
Industry NewsOABA Welcomes Nicole Wallace As Communication & Adm…
August 22, 2016
The Ohio AgriBusiness Association has hired Nicole Wallace as its communication and administrative coordinator. Wallace will help provide comprehensive communication Read More
Syngenta Sign
Crop InputsChemChina, Syngenta Receive Clearance From CFIUS
August 22, 2016
China National Chemical Corp. (ChemChina) and Syngenta have announced that the companies have received clearance on their proposed transaction from the Read More
ManagementAg Industry Shows and Rumors
August 18, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about the upcoming trade show schedule, crop protection merger updates, and content for Read More
MAGIE 2015
EquipmentMAGIE Takes The Pulse Of The Ag Retail Industry
August 18, 2016
Every year, one of the major highlights of my career as an ag journalist is attending the Midwest AG Industries Read More
MAGIE 2015 Overview
EquipmentPride In Professionalism On Display At MAGIE
August 18, 2016
The Illinois Fertilizer & Chemical Association (IFCA) is proud to partner with CropLife IRON and continue the tradition of bringing Read More
SprayersJenner Ag To Debut 25th Anniversary Edition Case IH Pat…
August 18, 2016
Visitors at the 2016 Midwest Ag Industries Exhibition (MAGIE) in Bloomington, IL, will have a unique photo opportunity, as Jenner Read More
Crop InputsEU Glyphosate Controversy Heating Up Yet Again
August 17, 2016
The battle over glyphosate rages on in Europe, creating a lot of question marks over whether the herbicide will continue Read More
Industry NewsNew Partnership Provides Improved Representation At Ohi…
August 16, 2016
The Ohio AgriBusiness Association (OABA) has retained Belinda Jones of Capitol Consulting Group, Inc. (CCG) for government relations work in Read More
Tissue testing
FertilizerMosaic: 6 Tips For Better Crop Nutrition In Corn
August 16, 2016
Late in the crop season is a good time to assess visual nutrient deficiencies and ensure early- and mid-season deficiencies Read More
WebinarsWebinar Schedule
August 14, 2016
Register for one of our upcoming Webinars or access our archive of past Webinars to view recordings of presentations that may be of interest to you. Read More
Dow DuPont
Crop InputsDowDuPont Update: EU Takes Closer Look at Merger
August 12, 2016
Dow Chemical Co. and DuPont Co. face months of haggling with European Union antitrust regulators who opened an in-depth probe Read More
ManagementNews from InfoAg 2016 and Weed Wands
August 11, 2016
Editors Paul Schrimpf and Eric Sfiligoj review what happened at last week’s big Precision Ag event and a possible solution Read More
Crop InputsFBN: We’re ‘Here To Stay’
August 11, 2016
PERSPECTIVE — If you’ve been following this site for a while you might remember a certain editorial we published on Read More
Diversified Agri-Services
StewardshipDiversified Agri-Services Certified In 4R Nutrient Stew…
August 11, 2016
The 4R Nutrient Stewardship Certification Program has announced that Diversified Agri-Services Inc. in McCutchenville, OH, has been added to its growing Read More
Soil
FertilizerSoil Health Experts Gain Ground On Standardized Measure…
August 11, 2016
Soil health experts from across North America plan to integrate more research projects to provide agricultural producers and policy makers Read More
Regulator 3.0 Concentrate
AdjuvantsNew Max Systems Product Aids Irrigation
August 11, 2016
A gentle rainfall is nearly always welcomed by crop producers, including those who rely on irrigation to produce a profitable Read More