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
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 100The Andersons Starts Venture Capital Subsidiary
January 26, 2015
The Andersons has established Maumee Ventures, a venture capital subsidiary designed to foster promising innovations that strategically align with the company’s core businesses. Read More
CropLife 100CHS Partners With Northern Partners Coop On Fertilizer Warehouse
January 21, 2015
In addition, the two companies will form a joint venture to build and operate a grain barge loading facility that will handle corn, soybeans and wheat for export through the CHS terminal at Myrtle Grove, LA. Read More
CropLife 100Wilbur-Ellis Move To Colorado Complete
January 20, 2015
Wilbur-Ellis Co. announces the opening of its new Agribusiness Division location in the Denver, CO, Metro Area. The new facility will host key personnel as the company shifts the base of its Agribusiness operations from California to Colorado. Read More
CropLife 100United Suppliers, McGregor Co., Five Others To Form Aligned Ag Distributors
January 20, 2015
These companies will continue to operate as independently owned and operated businesses, however, their crop protection divisions will now be formally aligned under the umbrella of Aligned Ag Distributors. Read More
CropLife 100Bozeman Named SEEDWAY Chief Operating Officer
January 16, 2015
He succeeds Donald Wertman, who will retire at the end of August 2015 after 40 years with the GROWMARK subsidiary. Read More
CropLife 100Wilbur-Ellis’ Craig Bair Honored For Safety Contributions To Ag Aviation
January 14, 2015
The William O. Marsh Safety Award recognizes significant achievements in safety, safety education or an outstanding operational safety program. Read More
Latest News
Frogeye Leaf Spot on soybean
FungicidesFungicides Promising Yield Bumps In Tough Times
February 1, 2015
Some exciting newcomers should make selling fungicides easier. Read More
Seed/BiotechDow Details Enlist Trait Stacking Standards
January 30, 2015
Dow says it will allow the Enlist trait to be stacked with advanced glyphosate traits only, and will not allow stacking with the first generation of the Roundup Ready trait. Read More
ManagementCropLife Retail Week: IFCA’s Jean Payne on Illinois wat…
January 30, 2015
Editor Eric Sfiligoj shares insight from the Illinois Fertilizer and Chemical Association conference including a chat with IFCA President Jean Read More
ManagementOABA Conference Set To Highlight Trends, Technology And…
January 29, 2015
The third annual Ohio AgriBusiness Association (OABA) Industry Conference is set to take place February 4-5. Read More
FertilizerThe Fertilizer Institute President Jahn Testifies Befor…
January 28, 2015
The committee hearing, "Freight Rail Transportation: Enhancing Safety, Efficiency, and Commerce," looked at challenges facing our nation's freight rail network created by higher demand, rules and regulations and infrastructure needs. Read More
HerbicidesPurdue University Acquires Technology For Herbicide Mol…
January 28, 2015
Protea's LAESI DP-1000 Instrument System will be used in Purdue's College of Agriculture, the Department of Botany and Plant Pathology, for the molecular imaging of herbicide active ingredients and other related compounds to optimize herbicide applications and improve weed management.  Read More
FertilizerH.J. Baker Hires New Crop Peformance Marketing Manager
January 27, 2015
As Marketing Manager for the Crop Performance division, Usman Khalid will work out of H.J. Baker’s global headquarters in Westport, CT, and will drive new initiatives for the division. Read More
CropLife 100The Andersons Starts Venture Capital Subsidiary
January 26, 2015
The Andersons has established Maumee Ventures, a venture capital subsidiary designed to foster promising innovations that strategically align with the company’s core businesses. Read More
Exclusive state-of-the art Stueve Construction designed “Vista View” Elevated Control Room.
Eric Sfiligoj2015 Agricultural Market Read: Mixed
January 26, 2015
The agricultural market could look radically different this year, profit-wise, depending upon which segment you do business in. Read More
Edward Chell Biosafe
Crop InputsBioSafe Systems Names Ed Chell California Territory Man…
January 26, 2015
BioSafe Systems has announced the recent addition of Ed Chell as California Territory Manager for the agrichemical division, supporting the crop protection, water treatment and food safety business segments. Read More
InsecticidesBayer CropScience Introduces Sivanto Insecticide
January 26, 2015
Sivanto precisely targets key damaging pests at multiple insect life stages to prevent damage to plants and help minimize the spread of diseases from insect carriers. Read More
ManagementRetail Collaboration, Communicating Agriculture’s Good …
January 23, 2015
Editors Paul Schrimpf and Eric Sfiligoj discuss the recent creation of Aligned Ag Distributors, and the US Farmers and Ranchers Read More
FertilizerOSU Expert: Toledo Water Crisis A Turning Point For Ohi…
January 23, 2015
The August 2014 water crisis in Toledo, OH, impacted Ohioans’ views of Lake Erie algae problems by increasing the attribution of blame of algae growth on agriculture. Read More
FertilizerH.J. Baker Launching TIGER XP
January 22, 2015
Tiger-Sul introduces this next generation sulphur-bentonite product with a proprietary activator – ensuring farmers have a well-balanced nutrient replacement program. Read More
Crop InputsH.J. Baker Expands China Sales Force
January 21, 2015
Global Agricultural firm H.J. Baker announced that sales veteran Shi Dongshen has joined their Shanghai office in China. This newest hire follows the recent opening of their Lianyungang Sulphur Bentonite Plant. Read More
CropLife 100CHS Partners With Northern Partners Coop On Fertilizer …
January 21, 2015
In addition, the two companies will form a joint venture to build and operate a grain barge loading facility that will handle corn, soybeans and wheat for export through the CHS terminal at Myrtle Grove, LA. Read More
Matt Hopkins5 Bold Predictions For Ag Retail In 2015
January 21, 2015
This past year was filled with ups and downs for the nation’s top ag retailers, but what will 2015 have in store? Read More
SoftwareDeere Launches App Center
January 20, 2015
The John Deere App Center provides users the ability to search and find apps most useful to their business or operations. Read More