Great Explanations

Anhydrous ammonia tank

Confusing. Frustrating. Com­plicated. When talking about the state of the fertilizer industry, these are just some of the words being tossed about by ag retailers and suppliers to describe what being involved in this business is like in 2009. (Editor’s note: Several other words are also commonly used in current fertilizer conversations, but none of these are fit for print because of their nature, definition, or social standing.)

Although it was a tall order, one man recently tried to put the entire state of the fertilizer industry into perspective. At the Wisconsin Crop Production Association annual meeting in mid-January, Joe Dillier, plant food marketing manager for GROWMARK, presented a speech on how fertilizer came to be in its current place in the agricultural community, offering a bit of historical insight and future projections along the way.

“I’m here today to talk about fertilizer and the way it is, and this probably won’t make anybody in this room happy,” said Dillier. “There’s a lot of consternation in the fertilizer market, and the big question on everyone’s mind is: How come it is the way it is?”

Starting out, Dillier explained just how different today’s fertilizer outlook is vs. the one being commonly accepted back in mid-2008. “Last summer, the fertilizer market was unbelievably strong, as was the case for all commodities. Crude oil prices were peaking at $147 per barrel. Corn futures peaked at just below $7 per bushel in July.”

Likewise, fertilizer prices were going up in leaps and bounds. Some examples Dillier cited included urea, increasing from $200 per ton in November 2006 to $830 per ton in August 2008; phosphate rose from $220 per ton in November 2006 to $1,150 per ton in August 2008; and anhydrous ammonia jumped from $150 per metric ton in fall 2006 to $931 in summer 2008.

Naturally, said Dillier, with conventional wisdom believing these prices would continue to climb throughout 2008, many ag retailers bought their fertilizer allotments early and often. “With everyone in-the-know saying that these prices and those for fertilizer were going to continue going up through the rest of the year, you had people buying more and more fertilizer further forward than ever before,” he said. “In some cases, people were buying fertilizer for use in the fall of 2008 in January 2008, which is very untypical.”

A Different World

Ultimately, however, these projections of an ever-increasing price curve for fertilizer proved to be wrong. “Today, baby, it is a completely different era,” said Dillier. In many cases, he added, prices have fallen back to their 2006 levels or below, leaving plenty of large fertilizer inventories in the nation’s storage facilities depreciating by the week.

As for why this rollercoaster of price increases and decreases had occurred, Dillier pointed to several factors coming into play. During mid-2008, the expanding middle class around the globe meant there was higher demand for grains. These extra acres of crops demanded more fertilizer to grow, so prices rose. “This also meant we raised record crop harvests around the world, and when grain demand dropped a bit in the fall of 2008, so did commodity prices, which affected fertilizer as well.”

Of course, this globalization of fertilizer was another reason for the rapid rise and fall of fertilizer prices. “We have a much longer supply chain today for fertilizer than existed 10 years ago,” said Dillier. “We input 55% to 60% of our nitrogen into this country. It used to be distributors would give their customers a break on price if things changed drastically, and they would take back an order of fertilizer as a good-will gesture. But that was for fertilizer coming from a local source. When you have a freighter coming from the Middle East that’s been sold for a certain price, the distributor or retailer now expects this load to be sold and delivered for the price agreed upon weeks or months before.”

Corn Is Key

As for where the fertilizer industry goes from here, Dillier said it all ties back to one very important word: Corn. “In fertilizer, it’s all about how many acres of corn are going to get planted in the spring,” he said. “That will determine how high the price of fertilizer is in the spring and whether there’s ample supply or whether it’s scramble time and people might not have any to sell.”

At the time of his speech, Dillier said corn prices had recovered somewhat from their $3.50 per bushel low in early December 2008 to approximately $4.70 per bushel. However, he added, the price differential between fertilizer intensive corn and fertilizer friendly soybeans was not very significant, which could convince many growers to forego extra corn acres for 2009.

“Right now, early projections say that corn acreage could range anywhere from 82 million acres this year to 90 million acres,” said Dillier. “If we hit 90 million, given the current standoff in the marketplace, there will be a serious potential for fertilizer shortages around the country. If we are at 82 million, I think the industry will be OK.”

For ag retailers looking to figure out how to buy fertilizer in 2009, Dillier offered up this advice: Proceed slowly. “We are recommending to our retailers that they buy fertilizer in small pieces when their grower-customers buy fertilizer,” he said. “If your grower has sold 25% of his 2009 crop, than you buy 25% of the fertilizer they need.”

Leave a Reply

Fertilizer Stories

Potash Corp Agrium
Crop InputsAgrium, Potash Corp To Merge To Create $36 Billion Company
September 12, 2016
Canada’s Agrium Inc. and Potash Corp of Saskatchewan Inc. have agreed to combine in a deal that would create a Read More
FertilizerBRANDT Specialty Fertilizers Help Grower Set Soybean Yield Record
September 12, 2016
BRANDT, a leading agriculture retailer and manufacturer of specialty Ag products, has announced that its new proprietary nutrition products were Read More
Corn Field
FertilizerBridging Crop Nutrition Science And Technology
September 7, 2016
The future seemed to draw nearer for the 1,600-plus attendees of the co-located InfoAg and International Precision Agriculture conferences in St. Read More
Fertilizer Bin
FertilizerState Of The Fertilizer Industry Report Highlights Environmental, Social Contributions
September 6, 2016
As consumers, we live in a world with access to more data than we could ever hope to mine through. Read More
Trending Articles
Corn Field
Eric SfiligojFacing Ag Industry Challenges
September 26, 2016
At the 2016 annual Mid America CropLife Association (MACA) meeting in September, a pair of crop protection company representatives discussed Read More
Bayer Monsanto
Crop InputsBayer-Monsanto Mega-Merger: 6 Things You Need To Know
September 14, 2016
Mega mergers have become almost routine in the agricultural industry. Right on the heels of Monday’s news that fertilizer giants Potash Read More
Potash Corp Agrium
Crop InputsAgrium, Potash Corp To Merge To Create $36 Billion Company
September 12, 2016
Canada’s Agrium Inc. and Potash Corp of Saskatchewan Inc. have agreed to combine in a deal that would create a Read More
Osage Co-op Elevator Osage, IA Finished Building
OpinionAre We Crazy?
September 8, 2016
At some point in the first few months of my employment here at CropLife® magazine, I started getting curious about Read More
ManagementMAGIE 2016 Highlights and Deere Anti-Trust
September 1, 2016
CropLife Editor Eric Sfiligoj discusses the recent Midwest AG Industries Exposition and the Department of Justice’s objection to John Deere Read More
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
Latest News
Young Corn Field
StewardshipStudy: Ohio Farmers Doing ‘A Good Job Of Managing…
September 27, 2016
Leaders from Ohio’s largest grain farming organizations announced today that Ohio farmers are doing their part in effectively managing phosphorus Read More
Growmark FS Outlet
Industry NewsGROWMARK To Purchase Suncor’s Share Of UPI
September 26, 2016
GROWMARK and Suncor have reached an agreement in which GROWMARK will purchase Suncor’s 50% interest in UPI, Inc. in Ontario, Read More
Corn Field
Eric SfiligojFacing Ag Industry Challenges
September 26, 2016
At the 2016 annual Mid America CropLife Association (MACA) meeting in September, a pair of crop protection company representatives discussed Read More
Syngenta Seedcare Institute
Seed/BiotechSyngenta Opens New North America Seedcare Institute In …
September 23, 2016
Syngenta unveiled its new Seedcare Institute in Stanton, MN, during a recent grand opening celebration. More than 150 industry leaders, Read More
StewardshipMonsanto Invests $1.6 Million In System To Quantify Gre…
September 23, 2016
The USDA – Natural Resources Conservation Service (USDA-NRCS) recently awarded the National Corn Growers Association (NCGA) and its Soil Health Read More
Pipe rack
LegislationCourt Sides With Ag Retailers On PSM
September 23, 2016
The D.C. Court of Appeals has ruled the Occupational Safety and Health Administration violated the Occupational Safety and Health Act when Read More
ManagementPacific Coast Fertilizer Announces Interest In Longview…
September 22, 2016
Pacific Coast Fertilizer LP (PCF) announced at the Cowlitz Economic Development Council board of directors meeting its interest in developing Read More
Young corn plants in soil
UncategorizedCool Planet Raises Additional $9 Million To Commerciali…
September 22, 2016
Cool Planet has announced the first close of a new financing round to commercialize the company’s Cool Terra Engineered Biocarbon Read More
Crop InputsJim Loar Promoted To President And CEO Of Cool Planet
September 22, 2016
In a move that reflects and reinforces the company’s commitment to the agricultural market, the Cool Planet board of directors Read More
BlendersNorth Dakota Coop Debuts Dry Fertilizer Plant
September 22, 2016
North Central Grain Cooperative has begun operations at a new dry fertilizer plant at its Rolla, ND, site. It is Read More
Crop InputsMonsanto, Bayer Officials Defend Proposed $66 Billion M…
September 21, 2016
Top officials for Monsanto and Bayer defended their proposed $66 billion merger before skeptical senators on Tuesday, insisting that the Read More
ManagementUpcoming Shows & Recent Events
September 19, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about upcoming trade shows and events and review the Mid America CropLife Association Read More
Industry NewsVerdesian Life Sciences Appoints New CEO
September 19, 2016
Verdesian Life Sciences, a plant health and nutrition company, today announced that its board of directors has named Kenneth M. Avery Read More
Corn
Crop InputsEPA Settles With Syngenta For Alleged Multi-Regional Pe…
September 19, 2016
The U.S. EPA has announced a multi-region settlement with Syngenta Crop Protection, LLC (Syngenta) in Greensboro, NC, for alleged violations of Read More
ManagementMerger Mania
September 16, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss this week’s mega-ag mergers of Bayer and Monsanto and Potash and Agrium. Read More
Monsanto sign
Crop InputsMonsanto Ends Up Being A Bargain For Bayer
September 16, 2016
History will say Bayer got a bargain in its $66 billion purchase of Monsanto, writes David Nicklaus, St. Louis Post-Dispatch. The Read More
Greg Musson, Gar Tootelian
CropLife 100California Ag Retailer Steps Up To Feed Families Affect…
September 16, 2016
GAR Tootelian, Inc. (GAR) in Reedley, CA, is challenging the Central Valley to help raise enough money and provide 525,000 meals Read More
Crop InputsBayer, Monsanto CEOs Discuss Merger
September 15, 2016
Werner Baumann, Bayer CEO, and Hugh Grant, Monsanto CEO, discuss why they decided to merge their companies. Read More