Key Trends In 2008

Diammonium Phosphate (DAP)

Even the most grizzled veterans of the crop input industry will admit that they have never seen anything like the developments in grain and crop nutrient markets during the last 12 months. Prices of the main fertilizer products surged to record levels last year. Published spot prices of anhydrous ammonia, diammonium phosphate (DAP), and muriate of potash at Midwest terminals increased about 60%, 100%, and 90%, respectively, from December 2006 to December 2007.

So, what will 2008 bring? There are few signs of any let-up so far this year, but forecasting from these levels should qualify as hazardous duty. A few trends are clear, however, and many of the fundamental factors that combined to pull or push prices up last year look like they will remain intact or potentially intensify this year.

First, crop nutrient demand prospects worldwide remain extremely positive due to record or near-record prices for a wide array of agricultural commodities. The latest estimates and forecasts from the International Fertilizer Industry Association (IFA) indicate that global nutrient use will increase 13% or about 20 million tons during the three-year period from 2006 through 2008. That is almost the equivalent of adding another U.S. to world demand in just three years. The compound annual growth rate (CAGR) of 4% during this period compares to a CAGR of just 1.8% from 1995 to 2005. The pace of global demand growth has more than doubled recently.

The positive demand outlook reflects the continued strength of grain and oilseed prices and outstanding farm economics in most regions of the world. In mid-January, the 2008 new crop prices for corn, soybeans, and hard red winter wheat were trading at roughly $5.20, $12.75, and $9.50 per bushel, respectively. Enough said.

And it’s not just a corn-soybean-wheat game. The Chicago Board of Trade nearby contract for rough rice was trading at a record level of more than $14 per hundredweight and the nearby contract for palm oil on the Kuala Lumpur exchange was trading at a record high of about 3,400 ringgits per ton or roughly 47 cents per pound. Agricultural commodity markets are sending clear and strong signals to farmers around the globe to step on the accelerator and rev up the powerful engines of production agriculture.

Back In North America

Closer to home, we estimate that U.S. nutrient use during the fertilizer year that ended on June 30, 2007, increased about 10% due to the big shift in acreage from soybeans to corn as well as moderate increases in application rates on most crops last year. We guess that nutrient use in 2007/08 will remain about flat at this high level as a result of some shifting back to soybeans and steady application rates. Nitrogen use is expected to drop slightly, phosphate use is projected to stay unchanged, and potash is forecast to increase modestly (assuming supplies are available).

These estimates are based on the assumption that U.S. growers will plant about 88 million acres of corn, 69.5 million acres of soybeans, and 64 million acres of course cut wheat in 2008. But it is far too early to make acreage calls. The war for acreage is far from over and factors such as the size of Southern Hemisphere crops and the import appetite of China and other key importing countries still need to play out before growers hook up their planters this spring.

A second trend that remains intact this year — and lately has intensified — is cost pressure on crop nutrient producers. The production and distribution of crop nutrients are energy intensive and high energy prices continue to push up both manufacturing and supply chain costs.

In addition, sharply higher raw materials costs also are putting upward pressure on crop nutrient prices. For example, recent jumps in phosphate rock, sulphur, and ammonia prices have sharply increased phosphate production costs, especially for non-integrated producers that purchase rather than mine rock. The price of phosphate rock has more than doubled this year. The price of sulphur delivered to Tampa has more than quadrupled from $60 per long ton in January 2007 to more than $250 per long ton today and the price of anhydrous ammonia delivered to Tampa has climbed from less than $300 per ton last summer to more than $500 per ton today. These increases combined have boosted just the cost of the raw materials required to produce a ton of DAP by a non-integrated producer by more than $300.

Leave a Reply

Management Stories

ManagementWashington Visit and Bayer/Monsanto Deal Update
May 26, 2016
Editors Paul Schrimpf and Eric Sfiligoj discusses a recent trip to DC and the latest news on the proposed pairing Read More
Crop InputsLand O’Lakes Announces Minnesota Water Quality Partnership
May 25, 2016
Governor Mark Dayton and Land O’Lakes, Inc. President and CEO Chris Policinski today announced a new public-private partnership to protect Read More
ManagementAgriculture 3.5: A Bumpy Road Ahead
May 24, 2016
You may have read my article a few years ago on Agriculture 3.0, which is a term I coined to Read More
Southern States Cooperative
Trending Articles
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Eric SfiligojPity The Monsanto Haters
May 23, 2016
An old saying goes thus: “Be careful what you wish for. You just might get it.” Given current events, there Read More
Monsanto Luling Plant
Crop InputsReport: Bayer Eyeing Monsanto For Possible Mega-Merger
May 16, 2016
Bayer AG is exploring a potential bid for U.S. competitor Monsanto Co. in a deal that would create the world’s Read More
Aerial Drone
Precision AgA Deeper Dive Into The Future Of Precision Ag
May 9, 2016
For about two decades now, through the good and the bad times, the ups and the downs inherent in agriculture, Read More
Palmer amaranth in soybean stubble
HerbicidesWSSA: Billions In Potential Economic Losses From Uncontrolled Weeds
May 4, 2016
What losses would corn and soybean growers experience if they were forced to eliminate herbicides and other control techniques from Read More
Eric SfiligojReasons For Hope In Commodity Prices
May 2, 2016
For many months now, the doomsayers have ruled the day in agriculture. Too much supply with too little demand would Read More
Latest News
Fertilizer Dealer Supply
UncategorizedFertilizer Dealer Supply Joins GVM
May 31, 2016
GVM has added Fertilizer Dealer Supply (FDS) to its growing network of Mako dealers. “I met Mark Anderson some 20 years Read More
Crop InputsRepar Registers New Biopesticide With U.S. EPA
May 31, 2016
Repar Corp., with headquarters in Silver Spring, MD, has developed Homobrassinolide 0.1%, a new generation plant growth promoter containing homobrassinolide, Read More
Industry NewsAligned Ag Distributors Names New VP Market Development
May 31, 2016
Aligned Ag Distributors LLC announced this morning the appointment of Tim Krueger to the position of VP Market Development. Krueger Read More
FertilizerCreating The Proper Environment For Yield Increases Wit…
May 31, 2016
Finely tuned nutrient management plans are helping farmers throughout the U.S. improve nutrient use efficiency, increase return on investment (ROI) Read More
Industry NewsJ.R. Simplot Names New Wholesale Agriculture Sales Vice…
May 31, 2016
Doug Stone will be joining the J. R. Simplot Co. as vice president, Wholesale Agricultural Sales within the Simplot AgriBusiness Read More
Adjuvants loading
AdjuvantsISAA 2016 Highlights Adjuvant Trends
May 31, 2016
Adjuvants can significantly improve the performance of crop protection products. Farmers and formulators enhance the efficacy of sprays by using Read More
Monsanto Luling Plant
Eric SfiligojWhat’s Next For Monsanto?
May 31, 2016
For the folks at Monsanto’s headquarters in St. Louis, MO, it has been an eventful few weeks. Back on May Read More
Craig Houin Sunrise Cooperative iPad
Precision AgState Of Precision Ag 2016: Gut Check Time For Value
May 31, 2016
There’s no denying that precision technologies and practices are more vibrant than ever. Equipment manufacturers have fine-tuned the hardware for Read More
ManagementWashington Visit and Bayer/Monsanto Deal Update
May 26, 2016
Editors Paul Schrimpf and Eric Sfiligoj discusses a recent trip to DC and the latest news on the proposed pairing Read More
Fertilizer closeup in hand
Industry NewsVerdesian: Striking A Balance Between Yield & ROI
May 26, 2016
Finely tuned nutrient management plans are helping farmers throughout the U.S. improve nutrient use efficiency, increase return on investment (ROI) Read More
Crop InputsLand O’Lakes Announces Minnesota Water Quality Pa…
May 25, 2016
Governor Mark Dayton and Land O’Lakes, Inc. President and CEO Chris Policinski today announced a new public-private partnership to protect Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Corn close up
Crop InputsArysta LifeScience Establishes Global Headquarters In R…
May 25, 2016
Arysta LifeScience has announced plans to relocate its global headquarters from West Palm Beach, FL, to Cary, NC, over the Read More
fertilizer blending and storage, Top 100
BlendersCHS Dakota Expansion Features AGCO’s GSI InterSys…
May 25, 2016
The continued growth of precision agriculture has increased farmer use of customized fertilizer blends best-suited for their soil conditions. Several Read More
ManagementAgriculture 3.5: A Bumpy Road Ahead
May 24, 2016
You may have read my article a few years ago on Agriculture 3.0, which is a term I coined to Read More
Topcon’s X30 display with CropSpec sensors
EquipmentGPS Autosteer Systems: Product Updates From Precision A…
May 24, 2016
Throughout 2015 GPS Steering solutions continued to evolve from what was once an after-market add on, to today’s cab where Read More
Trimble TMX-2050 In-Cab Display
Eric SfiligojThe Precision Ag Revolution Continues
May 24, 2016
It’s funny how much “the first time” tends to mean to someone as they get older. I sometimes can’t recall Read More
Eric Wintemute, AMVAC
Precision AgAMVAC Ups The Ante With New Precision Ag Technology
May 24, 2016
A potentially industry-changing at-plant soil treatment system from American Vanguard Corp., or AMVAC, is coming soon to large growers in Read More