Fertilizer Topics to Watch

Fertilizer Topics to Watch

Fertilizer Tender close-up

Weather, supply chain changes, and regulations are impacting retailers all over the map this fall when it comes to fertilizer.

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The mood at this summer’s South­western Fertilizer Conference was “a little more upbeat” than last year, reports Gene Vernon, Senior Director Crop Nutrition and Raw Ma­terial Sourcing at J.R. Simplot Co., Boise, ID.

Perhaps with good reason.

A mid-year check-in with two dozen CropLife 100 retailers, published in our July issue, showed that fertilizer had the most positive growth so far in their businesses in 2017 — compared with the seed, crop protection, and custom application categories. The uptick is especially notable following three straight years of depressed fertilizer sales.

That optimism could carry into the fall, though it may be tempered by a number of industry uncertainties.

In The Field

Take the weather, which can certainly set the stage for fall work. Spring was rough in many locations.

“We were off a little bit from last year volume-wise, because the winter lasted so long into the spring with unseasonable snow storms and excessive rain storms,” says Vernon. “We probably ended up missing at least one full early application across all our footprint, except in the state of Texas — those locations were the only ones that seem to be relatively normal.”

In Ohio, many growers saw “way too much rainfall,” reports Michael Tobe, Vice President and Agronomy Division Manager with Legacy Farmer Cooperative. In fact, some regions experienced flooding — which he thinks caused nitrogen and manganese deficiencies. On corn, his team went in with late sidedress treatments via Y-Drops.

Soybeans there were “starving” because of the wet feet caused by saturated soils, and crops were not able to manufacture nodulation nitrogen (N). The co-op applied a foliar fertilizer along with late-season weed treatments to help.

Tobe anticipates a “long, strung-out harvest” due to the replants his growers were forced to make — some actually having to plant a third time. He estimates customers lost, conservatively, 10% to 15% of crops and some areas faced up to 25% to 30% in losses.

The weather “always plays an outsized role,” summarizes Andy Jung, Director of Market and Strategic Analysis with The Mosaic Co. He notes that in areas of the U.S. that saw late planting and/or replanting, harvest could be delayed and therefore present a challenge to get fall fieldwork completed in a timely manner.

Tracking Prices, Supplies, Transport

A number of factors are impacting fertilizer markets heading into fall and 2018.

New fertilizer production in the U.S., slated to come online in 2017, is beginning to have an impact in the chain — though Simplot’s Vernon estimates there are still about a million and a half tons of N production yet to come into play. “Manufacturers are searching for homes for all that new production, and it’s going to fall right into some of the footprints where we do business,” he says. “We’re going to have to re-direct some of the traditional trade flows from suppliers.

“We thought we had it figured out this year, as a lot of these materials were supposed to come online last year. We made it through this spring without really a whole lot of impact, but we’re starting to see a little this summer.”

For example, CF Industries’ Port Neal urea tons are looking for homes to fill, and that’s anticipated to back up traditional suppliers in those arenas, says Vernon. “Where those tons end up, how aggressive their people get, how far they’re willing to ship it, that’s yet to be determined,” he adds. “It’s something we’re looking at basically on a daily basis.”

Ray Pinney, Division Man­ager at Panhandle Coop Association, Scottsbluff, NE, says the new production has made getting material easier and has given his company another option. “That’s kind of been a big deal, especially for us, because we’re on the edge of where most of our suppliers ship,” he says. “The new production may, from a supply and demand standpoint, make urea a bigger player as far as an N source.”

The main impact of the new supplies has been a decline in nitrogen imports, driven by a lower price differential between the U.S. and the rest of the world, says Jason Newton, Head of Market Research with Agrium.

“Ammonia supplies may be slightly less predictable than normal leading into the fall application season, as there is a project coming on stream in the second half of 2017 that is adding urea capacity, but it will consume ammonia that is currently being sold,” he says. “The timing of the urea supply coming on line will impact ammonia availability from the plant.”

Consensus among stakeholders CropLife® contacted was that fertilizer markets look fairly firm, and they do not foresee any huge re-sets.

“Bottom line, it really doesn’t matter what the price is because the market is only going to allow us to make so much,” Pinney points out. “My biggest concern is the margin on fertilizer.”

He’s also concerned about the tightness of the rail market and logistics as fertilizer purchases get ramped up. “And rail rates have gotten too high versus truck,” he notes. “There’s just no reward if you’re able to take shuttles, there’s really just not an advantage today and there should be.”

Simplot’s Vernon suggests that if the industry backs away from fall fill programs and takes no tons early, there will be “a mess of problems” trying to get it all delivered by springtime. He thinks his region would have experienced just these issues in 2017 with the excessive snow and rain that fell from January through the end of April — but the weather actually slowed down application so much, it allowed transportation and logistics to get caught back up, recharging inventory.

Mosaic’s Jung says the spring season ended with below-average inventories in the distribution channel, thus setting up a situation where the summer fill (to meet fall fertilizer needs) has seen strong uptake on his firm’s products.

“International demand has also been robust, as we expect record setting global phosphate shipments in 2017 at 67 million to 68 million metric tons, and just shy of record-setting potash shipments of 62 million to 63 million metric tons,” he reports.

Regulations Add to Work

Retailers are stepping up as new fertilizer regulations are kicking in across the country. For instance, in Ohio, growers with 50 acres or more who do their own fertilizer application need to be certified by September 30. The rule is to prevent fertilizer run-off into the western basin of Lake Erie, renowned for its algae blooms. Tobe says many of Legacy Farmer Coop’s customer had not complied with the mandate as of early August.

He sees a bigger challenge come spring when growers like to do their own nitrogen sidedress applications.

To help, the co-op plans to offer producers the needed 3½-hour training sessions in-house with the help of local extension staff.

On the radar for J.R. Simplot are California’s required nutrient management plans. The plans haven’t been widely implemented yet, but Vernon sees them as “the big regulatory wrinkle for us in the near future.” He anticipates the plans will be adopted in the Pacific Northwest before long as well. “It’s going to take over a sizeable portion of our footprint for our retail sides,” he says.

Simplot is readying its teams. “It’s a whole new level of responsibility for the crop advisor and the grower. You’re basically put on a budget that only allows ‘X’ number of units of N, phosphorous (P), and potassium (K) — it’s all they can work with,” says Vernon. “It’s just working in a very tight box compared to what they’re used to.”

He does add that if a crop advisor and company are well-prepared for this kind of regulation, it can be a differentiating factor that helps set them above their competition.