One For The Ages

Fertilizer Storage

By all the early projections, 2007 will be the kind of year retailers will point to for decades to come as a “magical time.” The stars are aligned, economic conditions are strong, and, most importantly, grower-customers have more money to spend on inputs than at any time in recent memory. One industry insider sums up the early buzz on the 2007 growing season this way: “An old-timer I talked with recently said there are perhaps only 3 or 4 years out of every 100 years where everything seems to line up exactly right for an incredible ag year to occur. This looks to be one of those years.”

For the fertilizer industry, this would be a very welcome change indeed. According to most ag retailers and crop nutrient suppliers, 2006 was an OK sales year for most fertilizer types. However, high natural gas prices, tighter margins, and low commodity prices kept overall gains to a minimum. “Products such as phosphate (P) and potash (K) had much higher prices in 2006 than they had in the past few years,” says Bruce Vernon, crop nutrient director, marketing and risk management for Agriliance, St. Paul, MN. “This really reduced application rates in some instances, and still might going into the 2007 season.”

But, according to Kim Polizotto, chief economist for PCS Sales, Northbrook, IL, it doesn’t appear that the market negatives of 2006 will have any lasting impact on 2007. “I was a little bit concerned coming out of the fall that where growers had good crop yields, they would cut back on their fertilizer programs for 2007 as a result,” says Polizotto. “Now, I’m pleased to hear that won’t be the case. Right now, there are no black clouds on the horizon when it comes to spring fertilizer usage. Growers have more money, and they appear willing to spend it in the hope of making even more money by year’s end.”

Cliff Daughtery, director of operations of the fertilizer division for United Suppliers, Inc., Eldora, IA, agrees with Polizotto’s market assessment. “We are already ahead in 2007 of what fertilizer application we did in 2006,” says Daughtery. “There’s already some anhydrous ammonia (NH3) that’s been put down in January in our market.”

An Ethanol Thank You

Without question, the fertilizer business has the incredible excitement surrounding corn-derived ethanol to thank for this outlook. According to USDA and many private crop analysts, U.S. growers are looking to add anywhere from 6 million to 9 million more acres of corn in 2007, with many following a continuous corn crop model for the foreseeable future. As Dr. Bob Nielsen, agronomy professor at Purdue University, points out, the nitrogen (N) rates required in such a system range from 30 pounds to 50 pounds more per acre than in a corn-soybean rotation. A bushel of corn also removes 0.37 pounds of P and 0.27 pounds of K on average from the soil as well.

Coupled with this increased corn acreage, growers are finding the selling price for corn much higher than in the past. For much of the 2000s, corn prices struggled to break the $2 per bushel mark. Today, thanks in large part to more corn going into ethanol processing, a bushel of corn is selling for closer to $3.30 — a healthy 65% increase in one year’s time.

“Ethanol is the most fantastic thing in the market, ever,” said Richard Gearheard, president, retail, for Agrium U.S. Inc., Denver, CO, speaking at the 2006 Agricultural Retailers Association meeting. “With more corn acres, there will be more fertilizer used, helping to push retailer revenues up.”

Supply And Logistics

Of course, fertilizer usage will only improve if there’s fertilizer available. With N, for instance, much of the U.S. supply comes from overseas, a by-product of the unpredictable natural gas prices that plagued the marketplace back in the early 2000s. According to several sources, N imports in 2007 look like they were will be down 0.5 million tons. In addition, one Russian K mine recently experienced a “devastating flood” and may never reopen. Effectively, this removes 1.4 million tons of K from the world market and increased prices approximately $10 per ton.

Making this supply situation even more precarious, says Dave Johnson, fertilizer director for United Agri Products (UAP), Greeley, CO, many importers have kept their inventories of crop nutrients low because of what happened in 2006. “After [Hurricane] Katrina hit the country, you had some very high price increases for several fertilizers, and traders bought more than they could sell and took a loss,” he says. “After that happened, many traders vowed that this would never happen again, so they have waited to rebuild their inventories. This, combined with expected higher demand, could cause product shortages in the spring. Already, it looks like the U.S. will be net short on urea, which has driven up the prices for other N fertilizers.”

More troubling, some industry insiders aren’t certain suppliers will be able to get their fertilizers where they are going because of obstacles in the transportation chain. According to Agriliance’s Vernon, this is particularly true in the rail system. Because of consolidation, there are today only four companies responsible for servicing 90% of the nation’s rail shipments. As a result, the costs of using these carriers has skyrocketed.

“The price of shipping NH3 by rail has gone up more than $100 per car in the past year,” he says. “At these prices, the industry is still able to service the Midwest basically, but shipping by rail east of the Mississippi River will increasingly become a concern.”

Even worse, says UAP’s Johnson, many rail carriers are becoming increasingly reluctant to ship any hazardous materials such as NH3. “If it wasn’t required, I think many railroad companies would have already stopped handling NH3 altogether,” he says. “The trouble is suppliers don’t have many other transportation options. The barge and trucking systems can only handle so much more fertilizer before they are maxed out on available space.”

During the 2007 spring season, Johnson predicts all these factors could spell trouble for fertilizer logistics. “With the industry moving 5 million to 6 million more tons through the system than ever before, I truly think 2007 will test the transportation system in this country,” he says. “This year, things could be a lot more uncertain.”

More Competitive Worldwide

To avoid any potential shortfalls in fertilizer this season, many suppliers say that early planning has become even more important for 2007 than in years past. According to Johnson, dealers need to pay extra attention to the world fertilizer market to understand how things might play out in the U.S. “Like it or not, the U.S. no longer drives the world’s fertilizer market,” he says. “What’s happening in places such as China and India is a better way to determine how much fertilizer will be made available for U.S. use.” At the local level, adds Johnson, fertilizer dealers should rely on the wisdom of trusted advisors for determining market dynamics and follow this advice.

Despite these and other concerns — such as persistent wet weather keeping applicators out of the field — most fertilizer sources agree that 2007 will be something truly special for the marketplace. “Everyone is feeling really good about the prospects as the industry prepares for spring 2007,” says Johnson. “Come fall, I’m certain we will all still feel pretty good. With higher commodity prices and more acres of corn to tend to, this should be one of the most memorable years we’ve ever had.”

Leave a Reply

Fertilizer Stories

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
FertilizerOSHA Hammers West Fertilizer With Over $100K In Fines For April Explosion
October 10, 2013
The Occupational Safety and Health Administration is fining the parent company of the West Fertilizer plant, Adair Grain Inc., $118,300 for 24 violations. Read More
FertilizerTFI Appeals Chesapeake Bay TMDL Ruling
October 10, 2013
The Fertilizer Institute joined a coalition appealing a U.S. District Court ruling on the Chesapeake Bay Total Maximum Daily Load (TMDL) for nitrogen and phosphorus. Read More

Trending Articles

Green Valley Ag facility
Retail FacilitiesGreen Valley Ag Adopts A.J. Sackett’s Precision Fertilizer Blending® Technology At New Facility
July 8, 2014
Sackett's Precision Fertilizer Blending® Technology is making huge strides around the world. Green Valley Ag adopts the technology at its new facility to support its advancing agronomic needs. Read More
Retail FacilitiesWaconia Manufacturing Builds Facility Designed For Speed, Efficiency
July 7, 2014
To make its new hub facility more efficient, Cooperative Elevator enlisted the aid of Waconia Manufacturing. Read More
EquipmentSummer Show Preview 2014: Superior Sprayers Take The Field
July 3, 2014
In this final installment of our coverage of the major categories of Big IRON that retailers can expect to test-drive at this summer’s events, here is a look at 19 sprayers. Read More
Scouting a soybean patch at Green Valley Ag.
EmployeesCropLife Compensation Survey: Battling Talent Drain
July 2, 2014
Retailers too often lose employees to companies outside of agriculture, while recruiting efforts are most often limited to competitors and other ag-focused organizations. Read More
HerbicidesDow AgroSciences Introduces SureStart II Herbicide
June 16, 2014
The enhanced formulation has improved viscosity and increased stability under heat and controls more than 60 high-anxiety grasses and broadleaf weeds found in corn fields. Read More
HerbicidesBASF Investing $270 Million To Expand U.S. Herbicide Production
June 11, 2014
BASF has invested more than $270 million to expand herbicide production capacities in the U.S., including more than 20 new products to be launched over next two years. Read More

Latest News

StewardshipMonsanto Joins Panel Of Innovators To Advance Research …
July 30, 2014
Monsanto Co. and The Climate Corp., its division, recently joined a roundtable of experts at the White House to share ideas and research approaches to help the world’s farmers manage and adapt to the impact of climate change on the global food supply. Read More
Crop InputsSoybean Checkoff Produces Big ROI
July 30, 2014
Under the soy checkoff program, all U.S. soybean farmers contribute a small percentage of their gross soybean sales for research and marketing projects that maximize their profit potential. Read More
CropLife 100Learfield Sports, CHS Agree To Football-Centric, Colleg…
July 30, 2014
CHS Inc. will embark on a highly integrated collegiate sports sponsorship platform with 24 Division I universities in 19 states designed to reach the farmer-owned cooperative's rural owners and customers. Read More
LegislationUSDA Implements Key Farm Bill Crop Insurance Provision
July 30, 2014
The new Supplemental Coverage Option, available through the federal crop insurance program and set to begin with the 2015 crop year, is designed to help protect producers from yield and market volatility. Read More
CropLife 100Wilbur-Ellis Forms New Organizational Structure For Its…
July 30, 2014
The new structure will provide more responsive internal support and will allow regional vice presidents and area managers to spend more time with customers, on talent development and on operational excellence across branches. Read More
Palmer pigweed in cotton
HerbicidesNew Training Modules On Herbicide Resistance Now Availa…
July 30, 2014
The Weed Science Society of America has announced the availability of three new education modules on herbicide resistance in weeds. Read More
HerbicidesWillowood To Market Glufosinate
July 28, 2014
Willowood USA recently announced that Federal EPA has approved its technical registration for glufosinate. Read More
InsecticidesHow To Scout For Corn Earworms In Corn
July 28, 2014
In her weekly report, University of Missouri Agronomy Specialist Jill Scheidt discusses what to look for when scouting for corn earworm. Read More
Crop InputsDuPont Pioneer, Weyerhaeuser Enter Technology License A…
July 28, 2014
The agreement brings together agricultural and forestry know-how to sustainably improve crop productivity for corn growers around the world. Read More
EquipmentAGCO Launches Global iPad App
July 28, 2014
The free AGCO Global iPad App can be downloaded from the Apple iTunes Store and features the full family of RoGator self-propelled sprayers and TerraGator high-floatation spreaders. Read More
Eric SfiligojYuma Centennial Ag Supply Earns 2014 National Environme…
July 28, 2014
Colorado-based ag retailer receives top trophy in 24th annual DuPont Crop Protection/CropLife ceremony. Read More
CropLife 100Pinnacle Forms Alliance With Wildlife Managment, Seed O…
July 25, 2014
The strategic alliance will provide Tecomate with key wildlife products, processing facilities, distribution centers and sales through Pinnacle’s ever-growing retail network. Read More
ManagementFranken Presses White House On RFS Support
July 25, 2014
Al Franken and a group of Senate democrats recently met with senior White House official John Podesta to urge the administration to change its position on an EPA proposal. Read More
ManagementASA, FarmLink To Launch ‘Operation Benchmark̵…
July 25, 2014
The American Soybean Association (ASA) and FarmLink are teaming up to help farmers close the $11 billion gap between what they harvested in 2013 and what they could harvest annually. Read More
StewardshipNorthey: Farmers Commit $1.4 Million to Try New Water Q…
July 25, 2014
The practices that are eligible for funding include cover crops, no-till or strip till and using a nitrification inhibitor when applying fall fertilizer. Read More
Precision AgFarmers Learn How Changing World Will Impact Iowa
July 24, 2014
Technology and understanding global consumer demand for Iowa farm products brought hundreds of farmers and agribusiness leaders to Ames recently for the annual Iowa Farm Bureau Federation Economic Summit. Read More
HerbicidesPurdue: Late Season Weeds May Require Manual Removal
July 24, 2014
Hand-rouging and pulling late season weeds by hand may be the best way to remove them, more so than using a herbicide, a Purdue Extension weed scientist says. Read More
Soybean Field
InsecticidesTransform WG, Closer SC Insecticides Receive R&D 10…
July 23, 2014
Dow AgroSciences has received the award from R&D Magazine for Transform WG insecticide and Closer SC insecticide with Isoclast active. Read More