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

Sulfur deficency in corn
Crop InputsManaging Sulfur Deficiency In Corn
January 6, 2017
Corn sulfur (S) deficiency is a growing problem in and across North Dakota, according to an article on the NDSU Read More
AFS Seed Retailer and Grower
Crop InputsThis Is Not Your Father’s World Of Nitrogen Management
January 6, 2017
Many of us older citizens can remember times when our fathers toiled day and night, to coax meager crop yields Read More
Young Corn Field
FertilizerPotassium Needs More Attention In Crop Nutrition
January 6, 2017
It’s well understood that plants require the right combination of the 14 essential mineral nutrients to sustain their growth, writes Read More
FertilizerSulfur: The 4th Major Nutrient
January 6, 2017
Sulfur is an essential nutrient in crop production. It is classified as a secondary element, along with Mg and Ca, Read More
Trending Articles
AgriSync
Matt Hopkins17 Agriculture Apps That Will Help You Farm Smarter In 2017
December 9, 2016
Ag professionals are working smarter, not harder, than ever before. Smart farming technologies have enabled them to reduce costs, maximize Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Precision AgTrimble Debuts End-to-End FMIS Platform
November 28, 2016
October’s inaugural PrecisionAg Vision Conference left this author with many thoughts and things to ponder in the coming months. Probably Read More
CHS Primeland
CropLife 100The 2016 CropLife 100 Report: Reviewing The Many Bulls And Bears Impacting This Year’s Marketplace
November 28, 2016
For virtually all of 2016, the nation was wholly focused on the big Presidential election. Some folks aligned themselves with Read More
Monsanto sign
Crop InputsMissouri Governor Meets With Bayer CEO To Discuss Monsanto Merger
November 21, 2016
Missouri Gov. Jay Nixon visited Bayer AG global headquarters in Leverkusen, Germany, on November 18 to discuss the proposed Bayer-Monsanto Read More
Latest News
Corn
Eric SfiligojThe Mood From Madison? In A Holding Pattern
January 16, 2017
Last week, I had the chance to attend the annual Wisconsin AgriBusiness Classic show in Madison, WI. It’s been a Read More
Syngenta Sign
Crop InputsAccenture Helps Syngenta Transform Its Global Logistics
January 13, 2017
Syngenta, a leading agriculture company, has collaborated with Accenture to design and implement a new digital logistics operating model across Read More
Fall Creek Seth Harden The Nature Conservancy
StewardshipLocal Farmers’ Watershed Initiative: Continuous Improve…
January 13, 2017
The goal in the Big Pine Watershed Project is to more intentionally do what local farmers and responsible ag retailers Read More
HerbicidesEPA Expands Enlist Duo Herbicide Registration To 34 Sta…
January 13, 2017
The U.S. EPA has expanded the geography for application of Enlist Duo herbicide from 15 to 34 states. This means Read More
Olson Ag Enterprise
CropLife 100Wilbur-Ellis Acquires Nebraska Seed Retailer
January 13, 2017
Wilbur-Ellis’ Agribusiness, a recognized leader in precision agriculture technology and the distribution and marketing of plant protection, seed and nutritional Read More
ManagementDeere-Precision Planting Update and the Ag Secretary Wa…
January 12, 2017
Editors Paul Schrimpf and Eric Sfiligoj provide the latest on the court date for John Deere/Precision Planting and the quest Read More
Monsanto sign
Seed/BiotechMonsanto, NRGene Form Agreement For Big Data Genomic An…
January 12, 2017
Monsanto Co. and NRGene have announced that the companies have reached a non-exclusive, multi-year global licensing agreement on NRGene’s genome-analysis Read More
AGCO Custom applicator
SprayersAGCO, Asmark Institute To Offer Training For Beginning …
January 11, 2017
AGCO Corp. and the Asmark Institute are collaborating to offer a new training program dedicated to educating and developing custom Read More
ManagementAg Land Values In Limbo In 2017
January 10, 2017
Several factors will come into play in 2017 that will determine the direction of land values. Randy Dickhut, senior vice Read More
Industry NewsPattison Agriculture Positioned To Be Leading Canadian …
January 10, 2017
Pattison Agriculture Limited (Pattison Agriculture), a division of The Jim Pattison Group (the Pattison Group), has announced the merger of Read More
Fertilizer Tender close-up
MicronutrientsHow Micronutrients Fit Into 2017 Fertility Plans
January 10, 2017
Where do micronutrients stand going forward in fertility plans? For one thing, Tim Mundorf, Field Representative with Midwest Laboratories, says Read More
Fertilizer application
State of the IndustryCautious Optimism On Fertilizer In 2017
January 10, 2017
What kind of fertilizer rates are growers and retailers looking at in 2017 and beyond? According to stakeholders CropLife magazine Read More
Asmus Farm Supply crop protection products in storage
State of the IndustryCrop Protection Products Market: Complexity Begets Oppo…
January 10, 2017
While other key market segments in agriculture continue to see tumultuous shifts in sales volumes going forward (large equipment sales are Read More
RoGator RG1300B AGCO
Sprayers10 Sprayers That Will Showcase The Latest Application T…
January 10, 2017
Sprayer manufacturers continue to step up their games with the latest in application technology. From direct injection systems and four-wheel Read More
Soybean Field
FungicidesGrowers Report Yield Boost, Extended Residual Disease C…
January 9, 2017
With the new growing season around the corner, it’s time to start thinking about inputs for 2017. As growers weigh Read More
Donald Trump
Eric SfiligojTrump’s New Ag Secretary Coming Soon?
January 9, 2017
As agricultural experts are quick to point out, incoming President Donald Trump largely has the nation’s growers to thank for Read More
Bayer Monsanto
Crop InputsThe Path Ahead For Mergers & Acquisitions In Agricu…
January 9, 2017
Bayer AG’s proposed $66 billion takeover of Monsanto would create, by far, the industry giant capturing more than a quarter Read More
Jeff Troike Ceres Solutions
CropLife 100Troike Named CEO Of Newly Formed Ceres Solutions Cooper…
January 6, 2017
Jeff Troike has been named President and CEO of the newly formed agribusiness known as Ceres Solutions Cooperative. Ceres Solutions Read More