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 100BRANDT Commemorates National Ag Day
March 20, 2015
The Illinois agriculture community gathered at BRANDT global headquarters on March 18 to celebrate National Ag Day behind this year's theme Sustaining Future Generations. Read More
Wheat Growers, North Central Farmers Elevator Pursue Merger
CropLife 100Wheat Growers, North Central Farmers Elevator Pursue Merger
March 3, 2015
Two CropLife 100 retailers — South Dakota Wheat Growers (ranked No. 11) and North Central Farmers Elevator (No. 19) — have entered into a Letter of Intent to unify the two companies into a newly named cooperative. Read More
Growmark Group
CropLife 100GROWMARK In 2015: Back, To The Future
March 2, 2015
The nation’s third largest ag retail organization is simultaneously moving forward while remembering its past. Read More
CropLife 100Pinnacle Expands Sanders Brand In The South
February 27, 2015
Pinnacle has acquired Hopkins Seed and Chemical in Qulin, MO, which expands the company's Sanders brand to nine Southern states. Read More
CropLife 100Pinnacle Launches New Providence Agriculture Location In Indiana
February 27, 2015
Pinnacle Agriculture Holdings — ranked No. 6 on the CropLife 100 — has established a new retail location in New Castle, IN, which will operate as part of Pinnacle's Providence Agriculture brand. Read More
Carl Casale of CHS
CropLife 100Cooperative CHS Returns $518 Million To Owners
February 23, 2015
The 2015 cash return to owners is based on CHS net income of $1.1 billion, the company's second highest on record. Read More
Latest News
HerbicidesNew EPA Glyphosate Restrictions Leaked To Reuters
April 1, 2015
U.S. regulators will put new restrictions on the world’s most widely used herbicide to help address the rapid expansion of Read More
FMC 3Rive 3D
Seed/BiotechFMC’s 3RIVE 3D Turns Heads
April 1, 2015
As winter trade shows tend to go, Commodity Classic tends to be a pretty big deal. You’ve got all the Read More
Nachurs Alpine Solutions, Liquid fertilizer, micronutrients, facility
MicronutrientsYara Launching YaraVita Procote Liquid Micronutrients
March 31, 2015
Yara North America, Inc. broadens its fertilizer coating offerings with the introduction of YaraVita Procote, oil-based micronutrient liquid suspensions that Read More
Industry NewsINCOTEC Board Member To Retire
March 31, 2015
JanWillem Breukink has decided to retire from his position on INCOTEC’s Board of Directors, effective April 1, 2015. This was Read More
MicronutrientsAgrium Deals Michigan Micronutrient Facility To Cameron…
March 31, 2015
Cameron Chemicals, Inc. has announced today that it has entered into a definitive agreement with Agrium Inc. to purchase the Read More
Industry NewsH.J. Baker Creates, Fills New Pacific Northwest Sales P…
March 30, 2015
H.J. Baker announced today that Gary Bingham has joined the company’s Crop Performance Division to further deepen its sales portfolio Read More
Algal blooms
StewardshipStudy: Algae From Clogged Waterways Could Be Used As Bi…
March 30, 2015
Water-borne algal blooms from farm fertilizer runoff can destroy aquatic life and clog rivers and lakes, but scientists are reporting Read More
Young corn plants
Stewardship4R Nutrient Stewardship Summit Coming To DC
March 30, 2015
The annual 4R Nutrient Stewardship Summit will be held on May 12 in Washington DC. The summit will include a full Read More
FungicidesSyngenta Suing Willowood Over Azoxystrobin Fungicide
March 27, 2015
Syngenta announced today that it has sued agrochemical maker Willowood, LLC., for patent and copyright infringement, as well as unfair Read More
ManagementRetail Week: The Future Of Mycogen Seeds; The 4Rs At Na…
March 27, 2015
Editors Eric Sfiligoj and Matt Hopkins discuss recent trips, including a look at the future of Mycogen Seeds at Dow Read More
Eric SfiligojMonsanto Hears The WHO
March 27, 2015
Another challenge to the safety of glyphosate, and the responses from supporters and opponents, calls to mind a classic Dr. Seuss story. Read More
Industry NewsMonty’s Plant Food Expands Sales Team
March 27, 2015
Monty’s Plant Food Company, a leader in natural soil enhancement and  plant fertility products, has hired Andrew Bullock as a Read More
Crop InputsSyngenta Louisiana Plant Poised For 2015 Production
March 26, 2015
As the 2015 planting season gets underway, growers across the country will need crop protection products to combat pests and Read More
Lake Erie Nutrient Stewardship
LegislationOhio Lawmakers Finalize Phosphorus Restrictions
March 25, 2015
State lawmakers on Wednesday finalized new rules designed to curb toxic algal blooms on Lake Erie, calling the regulations a major step forward in addressing the problem. Read More
Spreaders17 Fertilizer Spreaders For 2015
March 25, 2015
Manufacturers shoot for versatility and accuracy in this year's crop of fertilizer spreaders. Read More
Industry NewsMonty’s Hires Mid-South Product Consultant
March 25, 2015
Monty's Plant Food Co. has hired Matt Woodring as a Product Consultant for portions of Central Kentucky and Tennessee.    Read More
StewardshipMapShots Integrates With DriftWatch
March 23, 2015
Growers and agricultural providers using AgStudio FARM and AgStudio PRO can now view vital information about specialty crops and apiaries through a recent integration with the DriftWatch Specialty Crop Site Registry from FieldWatch, Inc. Read More
Crop InputsWorld Health Organization Report Contradicts Scientific…
March 23, 2015
A new report from the World Health Organization has classified glyphosate with a “2A” rating as a probable carcinogen, a Read More