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

Flooded corn in Indiana
FertilizerBoth Wet and Dry Conditions Threaten Nitrogen Loss
May 15, 2017
The weather is notoriously unpredictable, leading to challenges for planting, harvesting and applying the nitrogen (N) your corn crop needs. Read More
Iowa waterways
FertilizerDow AgroSciences Recognizes Ag Retailers’ Role in Protecting Iowa Water Quality
April 6, 2017
The state of Iowa and its agriculture community have worked for decades to preserve soil health, protect water quality and Read More
Yara West Sacramento Ribbon Cutting
Crop InputsYara West Sacramento Is Newest Addition
March 27, 2017
Yara’s West Sacramento Terminal was officially welcomed March 21 as the newest Yara North America facility in the U.S. While continually Read More
Nutrients for Life Foundation Teacher
FertilizerNutrients For Life Foundation Celebrates 10 Years Teaching Fertilizer Education
March 23, 2017
Those in agriculture know fertilizer is a vital ingredient to grow strong, productive crops. In fact, fertilizer is responsible for Read More
Trending Articles
Migrant farm workers
LegislationTrump: Immigration Crackdown Won’t Impact U.S. Agriculture
May 16, 2017
President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry Read More
AGCO Ratliff featured
Eric SfiligojRemembering Robert Ratliff
May 15, 2017
With all the fast-paced happenings in agriculture this spring, with multiple mergers in the works and planting season in full Read More
Case sprayer nozzle closeup
EquipmentSpray Application: A Nozzle Renaissance
May 2, 2017
If you had asked four-decade ag veteran Mark Bartel, President of Wilger Inc., just a few years ago what lay Read More
ManagementWashington Update, Dow-DuPont Earnings, and the Passing of an AGCO Legend
April 27, 2017
Editors Paul Schrimpf and Eric Sfiligoj talk about the latest Beltway news, crop protection company 1st quarter numbers, and the Read More
Crop InputsFlying Under the Radar No More, FMC Goes Big
April 13, 2017
Describing FMC as “under the radar,” admittedly, is probably a stretch. But in a snap of the fingers, FMC upped Read More
Young Corn Plants
Crop NutritionStill Hunting Yields
April 1, 2017
There’s no denying it — the agricultural marketplace today is undergoing a fundamental shift in fortunes. Not too many years Read More
Latest News
ManagementTrip Report, PSM R.I.P, and Ag’s Reaction to Federal Bu…
May 25, 2017
Editors Paul Schrimpf and Eric Sfiligoj talk about their recent travels, the end for Process Safety Management (PSM), and how Read More
Corn soil
LegislationARA Member Testifies Before Senate Ag Committee
May 25, 2017
Agricultural retailers stand on the front-lines of the American economy. As trusted advisors to America’s farmers, ag retailers are uniquely Read More
Young corn plants in soil
Crop InputsFortenza Insecticide Seed Treatment Receives EPA Regist…
May 25, 2017
Fortenza seed treatment insecticide from Syngenta has received registration approval from the U.S. EPA for use on corn and cotton Read More
ManagementFarm Market iD’s Agriculture Database Now Covers More T…
May 25, 2017
Farm Market iD, farmmarketid.com, has announced the release of its 2017 Annual Update of its farm and land database. The Read More
Food IT Fork-to-Farm
Precision AgThe Mixing Bowl Event Connects Technology, Food, and Ag…
May 24, 2017
For the fourth consecutive year, The Mixing Bowl presents FOOD IT, under the theme “Fork to Farm.” Action-oriented entrepreneurs, industry Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Seed/BiotechKansas State University Researchers Find New Pathogens …
May 24, 2017
A single seed seems so simple. Put it in the ground, give it some care, and you’ve soon grown food. Read More
Soybean Field
HerbicidesNew Dicamba Herbicide Premix Coming Soon from Syngenta
May 24, 2017
Syngenta has announced the name of its new herbicide featuring the active ingredients of S-metolachlor and dicamba. Upon registration by Read More
Eric SfiligojMonsanto ‘Picks Its Battles’ by Nixing Deere Deal
May 23, 2017
Having been in the trade journalism game since the mid-1980s, I remember several watershed moments during my career. One of Read More
FungicidesSyngenta Launches New Seed Treatment Fungicide
May 22, 2017
Syngenta has announced the launch of PLENARIS seed treatment fungicide for the control of downy mildew in sunflower. PLENARIS contains Read More
Corn close up
Crop InputsMonsanto’s First HPPD Herbicide Garners EPA Appro…
May 19, 2017
Monsanto announced today that EPA has federally approved Harness MAX Herbicide, the first herbicide in the Monsanto portfolio to provide Read More
ManagementPrecision Planting Deal, China Developments, and Enviro…
May 18, 2017
Editors Eric Sfiligoj and Dan Jacobs discuss the latest news on John Deere’s now dead deal for Precision Planting, China’s Read More
Soybean aphid leaf
InsecticidesMulti-state Research Reveals IPM Best Option for Treatm…
May 17, 2017
About 89.5 million acres of soybeans will be planted across the U.S. in 2017 — a record high, according to Read More
GROWMARK-2017-Interns
CropLife 100GROWMARK Names 2017 Summer Interns
May 16, 2017
Forty-two college students are exploring agricultural career opportunities this summer as GROWMARK interns. They are working at FS member cooperatives Read More
Migrant farm workers
LegislationTrump: Immigration Crackdown Won’t Impact U.S. Ag…
May 16, 2017
President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry Read More
Flooded corn in Indiana
FertilizerBoth Wet and Dry Conditions Threaten Nitrogen Loss
May 15, 2017
The weather is notoriously unpredictable, leading to challenges for planting, harvesting and applying the nitrogen (N) your corn crop needs. Read More
farmer Kip Tom
Precision AgAg Tech: On the Cusp of Something Big?
May 15, 2017
The investment and ag-tech sectors’ continuing courtship of agriculture, smoldering for three or four years now, was well in evidence at Read More
AGCO Ratliff featured
Eric SfiligojRemembering Robert Ratliff
May 15, 2017
With all the fast-paced happenings in agriculture this spring, with multiple mergers in the works and planting season in full Read More
Greg Musson, Gar Tootelian
ManagementOpinion: Shaking Your Perspective in Ag Retail
May 12, 2017
Some of you I’m sure have encountered our recently retired salesman extraordinaire, Dan Bellanger. He worked in the industry for Read More