Higher Prices Here To Stay?
September 11, 2008 By K. Elliott Nowels
Vice President, Business Development, Clear Window MultiMedia, Meister Media Worldwide
Has fertilizer now reached a new value plateau globally? Or, has it gone the way of gasoline prices, where we are unlikely to see gas for $2 per gallon again? Will fertilizer ever return to its old price structure? Here are thoughts from three prominent players in the fertilizer industry gathered at the World Fertilizer Conference this week in Seattle, WA:
Denny Addis, vice president of plant nutrients, The Andersons:
“When you consider the drivers, in raw material costs being up, currency changes (weakening of dollar) and demand — is this a new paradigm? The answer is probably ‘yes.’ Corn-based ethanol is going to be needed, because there are lots of hurdles we have to get over before cellulosic ethanol is more widely used. And it’s not really biofuel that is creating this demand. There are many people in the world that have got a taste for protein now and that’s likely to continue. We’re going to need a lot of feed grains. Prices will encourage new land in production, but that’s not going to happen very quickly.”
Mike Bennett, president and CEO, Terra Industries:
“All commodities exhibit cyclical tendencies, but the current circumstances are unlike any we’ve experienced in the past. World grain production will hit a new high this year, and yet we will only marginally gain on ending inventories. Biofuels are a small part of this, but it’s really meat consumption — more people eating more meat. The next few years will continue to see tight grain supplies. To compare, 10 years ago, we could make all the nitrogen we needed for a given crop year and that’s no longer the case. Once people have moved to a diet of meat, it will be a little difficult for them to go back to eating just cereal all the time.”
Bill Doyle, president and CEO, PotashCorp:
“The shift in paradigm is really one of crop production. We will never see $2 corn again. This is the first-ever demand cycle of this kind in the history of the fertilizer business. Yes, there will be a little softness in certain nutrient prices here and there in the marketplace, similar to oil prices, but the demand for grain worldwide is what will continue to drive demand for fertilizer. There are many people in the world that are getting their first taste of animal protein as their incomes have increased and they are not going back to starch-based diets. Only 5 percent of this increased grain demand is for biofuel, the rest is a shift in diet. What we have here is a story of human development globally.”
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