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

Allen Summers Asmark Institute PSM Training
EmployeesAsmark Institute Sponsors 25 ResponsibleAg Auditor Training Scholarships
June 21, 2016
The Asmark Institute has announced plans to provide 25 scholarships through their affiliated State fertilizer and agrichemical associations to help encourage Read More
LegislationVilsack Christens WinField Crop Adventure, Talks Monsanto-Bayer, GMO-Labeling and TPP
June 17, 2016
The WinField Crop Adventure grand opening ceremonies at Fair Oaks Farms (near Winemac, IN) welcomed USDA Secretary of Agriculture Tom Read More
Crop InputsFields of the Future: WinField Doubles Down with Agri-Education Center Investment (w/Photo Gallery)
June 16, 2016
Land O’Lakes, Inc., joined by Agriculture Secretary Tom Vilsack, today will host Fields of the Future, a live broadcast about Read More
Trending Articles
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To Explore IT Solutions
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries 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
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
Latest News
Allen Summers Asmark Institute PSM Training
EmployeesAsmark Institute Sponsors 25 ResponsibleAg Auditor Trai…
June 21, 2016
The Asmark Institute has announced plans to provide 25 scholarships through their affiliated State fertilizer and agrichemical associations to help encourage Read More
Kennebec Elevator
CropLife 100Wheat Growers Celebrates Kennebec Elevator Grand Openin…
June 21, 2016
Over 250 patrons and guests were on hand to celebrate Wheat Growers’ Kennebec Elevator grand opening. South Dakota Secretary of Read More
Land O Lakes
Industry NewsLand O’Lakes To Acquire Ceres
June 20, 2016
Land O’ Lakes, Inc. and Ceres, Inc. have announced that they have signed a definitive merger agreement under which Land O’Lakes Read More
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To …
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
LegislationVilsack Christens WinField Crop Adventure, Talks Monsan…
June 17, 2016
The WinField Crop Adventure grand opening ceremonies at Fair Oaks Farms (near Winemac, IN) welcomed USDA Secretary of Agriculture Tom Read More
Crop InputsFields of the Future: WinField Doubles Down with Agri-E…
June 16, 2016
Land O’Lakes, Inc., joined by Agriculture Secretary Tom Vilsack, today will host Fields of the Future, a live broadcast about Read More
Bayer sign
Crop InputsMonsanto Turns Back Bayer Again
June 14, 2016
Bayer AG’s bid to buy Monsanto Co. for more than $60 billion has hit an impasse that could pose a Read More
Young Corn Field
Crop NutritionNext Generation Of Nitrogen Efficiency Technology Conve…
June 13, 2016
Commodity price projections indicate farmers will continue to face tight margins again this year. Delivering higher yields and more bushels Read More
Industry NewsLa Crosse Seed Acquires Cover Crop Solutions Brand
June 10, 2016
La Crosse Seed announces that it is the new and exclusive owner of the entire family of brands of Cover Read More
ManagementTravel Plans and EU Rejection of Glyphosate, Biotech Cr…
June 9, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about upcoming trips and the latest in the European Union’s moves against glyphosate Read More
Aspire with Boron
Crop InputsStudy: Aspire with Boron Ups Alfalfa Yields
June 8, 2016
Alfalfa growers are successfully improving yields through the cutting season by applying an important micronutrient. In a recent study, The Read More
Industry NewsAGCO Announces Tragic Death of Longtime Employee
June 8, 2016
It is with deepest regret that we announce the passing of our dear friend, colleague and customer advocate-in-chief Kevin W. Read More
Wheat Field North Dakota
Industry NewsBASF Inks Northern Seed for Clearfield Wheat R&D Li…
June 6, 2016
BASF has licensed Northern Seed LLC to perform research and development of BASF’s proprietary and patented Clearfield technology in wheat. Read More
ManagementBayer/Monsanto, EU/Glyphosate, Corn/Soybeans
June 2, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss the latest regarding industry mergers, the glyphosate debate in Europe, and an update Read More
Growers looking at soybeans
Industry NewsKoch Licenses 2 Marrone Products For North American Dis…
June 2, 2016
Koch Agronomic Services (Koch), with support from its affiliate, Koch Biological Solutions, has secured exclusive rights to sell REGALIA Rx Read More
Gypsum
Industry NewsBeneficial Reuse Management Launches GYPSOIL BLENDABLE
June 2, 2016
Beneficial Reuse Management (BRM) has introduced GYPSOIL BLENDABLE, a new high-quality pelleted gypsum fertilizer that supplies 17% sulfate sulfur and Read More
StewardshipAgrible Joins Field To Market To Pursue Sustainable Sou…
June 1, 2016
Agrible, Inc. has joined Field to Market: The Alliance for Sustainable Agriculture as an associate member. As a leading multi-stakeholder Read More