Fertilizer: Uneven Recovery

Many in agriculture, from the relative newcomer to the jaded “seen it all” expert, describe the 2008 year in fertilizer using some pretty heady terms:
“Incredible.”
“Unprecedented.”
“Game-changing.”

Thanks to the violent fertilizer price crash last fall that followed on the heels of a massive price run-up through the spring and summer, many retailers bought high on expected shortages — only to be left holding the bag when customers did not follow through on purchases.

Retailers who did not dial into high-priced product made out well, but the clear majority spent the most recent pre-season dealing with angry growers refusing to pay fertilizer prices significantly higher than they were seeing for wholesale product on the Internet.

With the growing season winding down and fall fertilizer time closing in, retailers are taking stock of current market conditions from the supplier to the grower and making plans for the months ahead. By most accounts, any rebound in fertilizer will be measured in steps and not leaps.

Both Sides Of The Market

“Fall sales may improve a little over last year, but not much,” says Richard Warner, President, Warner Fertilizer Co. in Somerset, KY. Warner’s view is actually more optimistic than many dealers, who don’t believe that sales will increase this season at all.

However, some retailers have already seen improvements this season. Kathy Sims, President, Sims Fertilizer & Chemical, Osborne, KS, says: “We saw tremendous growth in the fertilizer segment of our business this year. Our sales were up by more than 100%.” The secret to Sims’ success? “We were very fortunate that we did not stock fertilizer last fall, and that put us in a very competitive position.”

Other retailers were not so lucky, but are still hopeful. Larry Beck, President, Mid-Valley Agricultural Services Inc., Linden, CA, says: “Fertilizer sales were down in 2008 because of the price of potash. Recently the price of potash has dropped, but it needs to come down another 20% to attract increased usage on the West Coast. The price of nitrogen and phosphorus will result in normal usage in 2010.” The high price of potash may impede its sales again this year and next, but growers will be putting on more phosphates and nitrogen.

Potash prices are still a problem for growers and retailers alike. “I feel that the price of potash needs to be adjusted downward even more,” says Verne Johnson, President, Jay-Mar, Inc. of Plover, WI. “Though it has come down in price, it’s still way too high relative to the price of nitrogen and phosphate.”

“Fall sales could be better as grain prices improve,” Warner says. “Crop input costs such as fertilizer, particularly potash, still need to decrease to overcome the bad taste that farmers had as a result of the two prior years’ high prices.”

Grain prices are also having a strong negative effect on fertilizer purchases. Wheat futures fell in early August, bringing down fertilizer demand. Brent W. Sutton, General Manager, Growers Fertilizer of Lake Alfred, FL, says: “Commodity prices need to improve for our customers. Lower cost fertilizer materials may help sales also.”

Whether or not commodity prices go back up, however, growers may not be able to skip adding fertilizer two years in a row. With lower grain prices, growers can’t afford to lose quality or yield as well. Dan Mogged, Vice President of Van Horn Inc., Cerro Gordo, IL, says: “Even with the commodity prices being down, [growers] know they need to replace fertilizer.” Van Horn Inc. has been taking respectable orders for fall: “It looks like they’re significantly increasing because they cut back last year,” Mogged says. “In a lot of cases, they’re putting on what they didn’t put on last year to make up for that.”

Johnson says Jay-Mar “would love to have better fall fertilizer sales, but low grain prices and even lower milk prices are making fall fertilizer application hard to afford. Another factor affecting the fall season is the price of potash,” he adds. “As of late July, the price of potash is way out-of-synch with the rest of the fertilizer market. Unless the prices paid to the farmer increase and/or the price of potash decreases, it will still be a disappointing fall season.”

We Shall Overcome

As for last year’s inventories, early returns from the 2009 CropLife 100 Survey indicate that the high-priced inventory has been dealt with and many retailers are ready for 2010.

“We just wrote down what we had and moved forward,” explains Mogged. “Looking back at last year as we were coming into it, the quicker you decided to take a hit on some stuff, the better you worked through it. Because if you decided to do it earlier, you got a better price for it than if you waited until later to just write it down.”

How can dealers avoid getting stuck with massive inventories again this year? “That’s the $64,000 question,” says Johnson. “If I knew the answer, I’d be a very rich man. We got stuck with expensive inventory this year because we and many other dealers relied on our trusted suppliers who told us that ‘You need to buy now or you won’t get your product.’ Then prices plummeted, leaving dealers stuck with bins and tanks full of high-priced inventory.” Jay-Mar isn’t running a specific promotion to unload inventories this fall; however, says Johnson: “Our goal is to have our bins and tanks as empty as possible, and our sales force will work to achieve this goal. We regularly solicit pre-pay business during the winter months … [and] anticipate that the potato growers in our area will be eager to pre-pay again this year.”

Adaptability can be key, says Sims: “After 30 years in the fertilizer and chemical business, we have never seen a year like this one. But one thing that is constant in this business is that every year is different and you have to adjust if you are going to survive.” Although Sims Fertilizer & Chemical managed to avoid last year’s massive fertilizer stockpiles, Sims says, “We did have some high priced inventories in chemicals, but because we sell high volumes we were able to buy some cheaper inventory and cost average what we sold.” Retailers still stuck with large fertilizer inventories may be able to benefit from such a strategy.

Both those who were burned by the high-priced inventories last year and those who managed to avoid it have advice to offer: “Watch product costs closely, follow grain and cattle prices, and listen to customers’ concerns and plans,” advises Warner.

“Buy and commit to the least amount possible,” recommends Sutton.

And finally, don’t forget about location: “We are fortunate to be within 10 miles of the port of Stockton, so we don’t require much storage,” says Beck.

As for 2010? The key is to not repeat last year’s problems with overstocked, high-priced inventory — and to remain optimistic. As Sims puts it: “We remain positive about next year’s sales and look forward to the new challenges.”

Leave a Reply

Fertilizer Stories

FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
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

Top 100 Articles

CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
CropLife 100BRANDT, Verdesian Ink Distribution Agreement
December 9, 2014
The agreement grants BRANDT the exclusive right to sell and market Verdesian’s patented Steric chemistry in the Turf and Ornamental and eastern U.S. ag markets under the BRANDT Reaction product line name. Read More
CropLife 100CropLife 100: The Colors Of Custom Application
December 5, 2014
Although many color spray rigs are in the yards of the nation’s top ag retailers, the majority of them still come in only a few shades. Read More
CropLife 100Pinnacle Invests In Meridian Agriculture Distribution
December 4, 2014
Meridian will provide retailers with supplier-branded products and numerous opportunities to differentiate themselves from their competitors. Read More
CropLife 100CropLife 100: Entering A New Seed Era
December 4, 2014
The seed category has been re-vitalized during the past few years, and more good news (and varieties) are headed the industry’s way in 2015. Read More
CropLife 100CropLife 100: The Depressed State Of Fertilizer
December 3, 2014
Following downright giddy growth earlier this decade, fertilizer sales have fallen back down to earth the past two years. Read More

Latest News

Seed/BiotechKaren Arthur Joins AgriThority As Seed Treatment Produc…
December 19, 2014
Prior to joining AgriThority, Arthur directed research and development programs, overseeing laboratory and field research, to build the Valent U.S.A. seed treatment portfolio. Read More
EquipmentJohn Deere To Sell Crop Insurance Business
December 19, 2014
Deere & Co. has reached a definitive agreement to sell its crop insurance business, subject to regulatory approval, to Farmers Mutual Hail Insurance Co. of Iowa. Read More
Crop InputsNufarm Fills Regulatory VP Position
December 18, 2014
Nufarm announced today that Rob Schwehr has been promoted to the position of Vice President of Innovation & Regulatory Affairs for Nufarm Americas. Read More
Seed/BiotechReport: China Approves Viptera Corn, U.S. Officials Awa…
December 17, 2014
Chinese authorities have informed some agriculture industry officials the government has approved U.S. imports of a type of genetically modified corn developed by Syngenta. Read More
FertilizerMonty’s Plant Food Brings In New Sales Rep
December 16, 2014
Monty's Plant Food Company has hired Warren Kearns as its newest Sales Representative for the South Carolina area. Read More
EquipmentHagie Wins 2014 CropLife IRON Product Of The Year Award
December 15, 2014
The self-propelled sprayer maker has a hit on its hands with the new STS Series model. Read More
Syngenta
Seed/BiotechSyngenta Sees China Approving Contentious GMO Corn Soon
December 15, 2014
Syngenta will make an announcement when it receives official documentation from China that Agrisure Viptera corn, known as MIR 162, has been cleared for import. Read More
Crop InputsVerdesian Life Sciences Names Vice President Of Communi…
December 15, 2014
Amy Bugg will oversee the execution of all promotional strategies for the corporate brand and the complete product portfolio. Read More
StewardshipFarmers, Retailers Attend 4R Certification 4U Workshop
December 15, 2014
More than 160 farmers and ag retailer attended the “4R Certification 4U” workshop December 12 to learn more about the 4Rs of nutrient stewardship, water quality research in the area and cost-sharing opportunities. Read More
Matt Hopkins10 Best New Agriculture Apps For 2015
December 15, 2014
These new agriculture apps are certain to help ag professionals do their jobs more efficiently in 2015 and beyond. Read More
ManagementARA Learnings, Retail Buying Intentions: Welcome To Cro…
December 12, 2014
This informal video program puts news and events effecting retailers into context, and features Editors Paul Schrimpf and Eric Sfiligoj. Read More
Seed/BiotechMonsanto Herbicide-Tolerant Technology Closer To Commer…
December 12, 2014
The final EIS moves Monsanto one step closer to the introduction of Bollgard II XtendFlex cotton and Roundup Ready 2 Xtend soybeans, paving the way to provide access to dicamba-tolerant soybeans and cotton. Read More
Seed/BiotechUSDA Issues Final Environmental Impact Statement On Her…
December 12, 2014
The USDA Animal and Plant Health Inspection Service (APHIS) is issuing a final environmental impact statement on varieties of cotton and soybeans that have been genetically engineered for resistance to several herbicides, including the one known as dicamba. Read More
CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
LegislationARA Applauds CFATS Passage Prior To Holiday Adjournment
December 11, 2014
The streamlined bill provides a four-year authorization of the CFATS program and guidance to DHS on key issues of chemical facility security Read More
Seed/BiotechBayer CropScience’s ILeVO Approved By EPA
December 11, 2014
EPA has approved ILeVO, the only seed treatment that protects the root system against infections caused by the Sudden Death Syndrome fungus and has activity against dangerous nematodes. Read More
Biologicals in Emerging Markets Map.
Crop InputsBiocontrols Could Quadruple By 2025; Will Regulators Pl…
December 11, 2014
The European experience with GMOs offers caution — and a promise — for biologicals. Read More
Crop InputsBASF Donates $75,000 To Feeding America
December 10, 2014
The donation will support Feeding America’s National Produce Program, an initiative that helps with planning, transportation and logistics to ensure fresh produce deliveries to the 200 member food banks around the country. Read More