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
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Match Made In Deviation
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More
Winter Wheat
CropLife 100South Dakota Co-op Member Owners Vote No On Unification
June 26, 2015
The Boards of Directors for North Central Farmers Elevator (NCFE) and Wheat Growers (WG) have announced that member-owners have voted Read More
CropLife 100The Andersons Acquires South Dakota Plant Nutrient Manufacturer Kay-Flo
May 20, 2015
The Andersons, Inc., ranked No. 22 on the CropLife 100, has purchased Kay Flo Industries of North Sioux City, SD. “This Read More
CropLife 100AgGateway’s Barcoding Initiative Progressing Nicely
May 8, 2015
According to legend (or Wikipedia), the first step towards modern bar codes came back in 1948, when Bernard Silver, a Read More
CropLife 100Pinnacle Agriculture Acquires Minnesota Retailer
April 14, 2015
Pinnacle Agriculture Holdings, LLC, ranked No. 6 on the CropLife 100,  has successfully acquired Liebl Ag, LLC in Ada, MN.  Read More
CropLife 100CHS, Aurora Cooperative Complete Fertilizer Storage, Grain Shuttle Loading Facility
April 13, 2015
CHS Inc., the nation’s leading cooperative and ranked No. 5 on the CropLife 100, and Aurora Cooperative (ranked No. 21) Read More
Latest News
ManagementUnited Suppliers/Land ‘O Lakes Merger & Crop Update
July 2, 2015
CropLife’s Paul Schrimpf and Eric Sfiligoj talk about the reasons behind the United Suppliers/Land ‘O Lakes merger and USDA’s recent Read More
Industry NewsBioSafe Adds To Sales Force
July 2, 2015
BioSafe Systems has announced the hire of two new members for its service team. David Britt recently joined the team Read More
Chesapeake Bay
ManagementChesapeake Bay Clean-Up Gets Renewed Attention
July 2, 2015
The Chesapeake Bay has been called one of the most biologically productive ecosystems in the world. It’s also one of Read More
Measuring Bulk Tanks
ManagementBulk Pesticide Compliance: Top 10 Areas Of Improvement …
July 1, 2015
  In honor of the 33-year run of David Letterman’s Late Show, the American Agronomic Stewardship Alliance (AASA) is happy Read More
Industry NewsArysta North America Hires Midwest Sales Manager
July 1, 2015
Arysta LifeScience North America recently announced the hiring of Brian Battles as the Senior Technical Sales Manager for the Midwest Read More
Farmer on tablet
Eric SfiligojThe Never-Ending Battle Against Modern Agriculture
July 1, 2015
In the world of comic books, the character of Superman often refers to the fight to save the world as Read More
Retail FacilitiesBuilding Up Ag Retail
July 1, 2015
In the oftentimes unpredictable world we live in, it’s nice to know some things can be reliably countered on to Read More
Retail FacilitiesMaple River Grain And Agronomy Phases In Site Developme…
July 1, 2015
Marcus Construction helped Maple River Grain and Agronomy in Casselton, ND, with the design-build of its dry fertilizer, liquid chemical/seed Read More
Retail FacilitiesA&B Welding Builds A New Liquid Terminal Hub For Br…
July 1, 2015
To build its new hub facility, Briggs Crop Nutrients enlisted the help of A&B Welding. The result, an efficient facility Read More
Edon Farmers Co-op
Retail FacilitiesNew Marcus Facility At Edon Farmers Co-op Provides More…
July 1, 2015
Edon Farmers Co-Op in Edon, OH, needed a new facility to consolidate outdated locations. Marcus Construction was able to design Read More
Retail FacilitiesKinder Morgan Expands Its Storage With A New Dome Barre…
July 1, 2015
Kinder Morgan wanted additional covered storage at its Dakota Bulk Terminal on the Mississippi River in St. Paul, MN. With Read More
Retail FacilitiesHeartland Tank Protects Fertilizer From Extreme Cold At…
July 1, 2015
The Arthur Companies in Harvey, ND, enlisted the help of Heartland Tank Companies to develop a new liquid fertilizer facility Read More
The McGregor Co. fertilizer loadout
Retail FacilitiesThe McGregor Co. Partners With Kahler Automation To Cre…
June 30, 2015
Kahler Automation helped The McGregor Co. expand its Clarkston, WA, operation with unstaffed loadout technology that enables customers to pick Read More
Dry and Liquid Plant
Retail FacilitiesKahler Automation Helps CHS Dakota Ag Cooperative Build…
June 30, 2015
CHS Dakota Ag Cooperative in Mooreton, ND, wanted a liquid/dry blender system that could meet the needs of its customers Read More
Crop InputsLand O’Lakes, United Suppliers To Merge Crop Inpu…
June 29, 2015
Land O’Lakes, Inc. and United Suppliers, Inc. of Ames, IA, today announced their intent to merge their crop inputs businesses. Read More
FungicidesHelena To Distribute Unique Summit Agro Fungicide
June 29, 2015
RANMAN 400 SC fungicide, the only fungicide with a FRAC group 21 designation, is now part of the innovative Summit Read More
Eric SfiligojIARC Targets 2,4-D In Latest Report
June 29, 2015
The International Agency for Research on Cancer (IARC) has struck again. Earlier this year in March, this agency of the Read More
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Ma…
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More