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

Patriot 4440 Sprayer close up
ManagementFlashing Back And Moving Forward On Spray Drift
May 3, 2016
The potential for pesticide drift remains an unavoidable feature of modern agriculture. Here, too, history repeats itself. “When Roundup debuted, Read More
ManagementBiotech Crops Developments and Millennials
April 28, 2016
Editors Eric Sfiligoj and Paul Schrimpf talk about the latest activities in biotech crops and a major shift in the Read More
StewardshipNRCS To Help Farmers Measure Conservation Impacts On Water Quality
April 27, 2016
The USDA has announced the availability of $2 million to help farmers install edge-of-field stations that monitor water quality as Read More
Valley Irrigation Valley 8000 series on corn
EquipmentValley Irrigation Receives Environmental Stewardship Honor
April 26, 2016
Valley Irrigation has been recognized as a Groundwater Guardian Green Site by the Groundwater Foundation. The Groundwater Guardian Green Site Read More
Trending Articles
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
Eric SfiligojMissing The Family Ties In Agriculture
April 25, 2016
By its nature, the agriculture market is cyclical. Up and down cycles come and go with a regular pattern. For Read More
HerbicidesHerbicide Resistance In Waterhemp Continues To Grow
April 22, 2016
Twenty-five years ago, waterhemp was virtually unknown to Illinois farmers. Today, the broadleaf weed blankets corn and soybean fields across Read More
Eric SfiligojBiotech Corn Drop More Economics Vs. Consumer Rejection
April 18, 2016
Since their introduction into the agricultural marketplace, biotech crops has steadily grown in acreage in the countries of the world Read More
Crop InputsBayer: 5 Reasons We Disagree With Maryland Neonic Ban
April 12, 2016
We’re disappointed that the Maryland legislature chose not to stand up for sound science and the rights of Maryland’s homeowners Read More
Corn
OpinionChallenging Global Economic Conditions Putting More Heat On U.S. Ag Retailers
April 7, 2016
There it is. That vague, slightly sickening feeling in the pit of my stomach. Things are getting weird out there. Read More
Latest News
Industry NewsHELM AGRO Adds New Marketing & Business Development…
May 4, 2016
HELM AGRO US, Inc. has announced the hiring of Troy Bettner as the company’s new Marketing & Business Development Leader. Bettner Read More
Palmer amaranth in soybean stubble
HerbicidesWSSA: Billions In Potential Economic Losses From Uncont…
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
Spray Drift
HerbicidesRoundup Ready Xtend: Silver Linings In Label Delays For…
May 4, 2016
Since 2014, Monsanto has trained more than 20,000 growers and retailers on all aspects of its new dicamba-tolerant system at Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSyngenta Board Appoints New CEO
May 4, 2016
Syngenta announced today the appointment of J. Erik Fyrwald, currently President and CEO of the U.S. chemistry distribution company Univar Read More
Crop InputsIntrexon Establishes Crop Protection Enterprise
May 4, 2016
Intrexon Corp., a leader in synthetic biology, has announced the formation of Intrexon Crop Protection (ICP), a wholly-owned subsidiary dedicated to Read More
Patriot 4440 Sprayer close up
ManagementFlashing Back And Moving Forward On Spray Drift
May 3, 2016
The potential for pesticide drift remains an unavoidable feature of modern agriculture. Here, too, history repeats itself. “When Roundup debuted, Read More
Giant Ragweed
HerbicidesSurvey Provides Insights On Giant Ragweed In The Corn B…
May 2, 2016
A new survey published in the journal Weed Science offers insights into the distribution and management of giant ragweed, a Read More
Truck dumping dry fertilizer
FertilizerFertilizer Logistics Q&A: Southern States’ Joe Wlod…
May 2, 2016
Joe Wlodkoski, Director of Agronomy Procurement, Fertilizer, Southern States Cooperative, is a 40-plus year fertilizer industry veteran. He is quite 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
West Central Dome structure
FertilizerFertilizer Logistics 2016: All Clear, So Far
May 1, 2016
After a relatively hairy early start to the spring fertilizer movement season with flooding in Louisiana and St. Louis, things Read More
BAICOR
CropLife 100BRANDT Acquires Utah Specialty Fertilizer Company
April 28, 2016
BRANDT, a leading agriculture retailer and manufacturer of specialty ag products, has acquired a majority interest in BAICOR, L.C. BAICOR, Read More
Soybean field
Industry NewsVerdesian Life Sciences Adds Vice President Of Business…
April 28, 2016
Verdesian Life Sciences has announced the addition of Marc Treurniet to the plant health and nutrition company’s management team. Treurniet Read More
ManagementBiotech Crops Developments and Millennials
April 28, 2016
Editors Eric Sfiligoj and Paul Schrimpf talk about the latest activities in biotech crops and a major shift in the Read More
Industry NewsNachurs-Alpine, Pathway Biologic Extend Marketing Agree…
April 28, 2016
Nachurs-Alpine Solutions (Marion, OH) and Pathway Biologic (Plant City, FL) announce an extension to their exclusive marketing agreement specific to Read More
MicronutrientsCharah Add Three Warehouses For SUL4R-PLUS Fertilizer
April 28, 2016
Charah, Inc., a total solutions company providing unparalleled service and innovation for the coal-fired power generation industry, announced today that Read More
Spenser Forgey, Yahama Fortix
FungicidesIndiana Farmer Wins Arysta LifeScience FORTIX Fungicide…
April 28, 2016
Arysta LifeScience North America recently presented Spenser Forgey, a grower from Young America, IN, with a new 2016 Yamaha Grizzly Read More
Corn Field
HerbicidesNew Wilbur‐Ellis Herbicide Targets Volunteer Corn
April 28, 2016
Wilbur‐Ellis Co., a recognized leader in marketing and distribution of crop protection products, as well as precision agriculture technology, has Read More
StewardshipNRCS To Help Farmers Measure Conservation Impacts On Wa…
April 27, 2016
The USDA has announced the availability of $2 million to help farmers install edge-of-field stations that monitor water quality as Read More