PACE Annual Report 2006

Urea Fertilizer

1. Biofuels

The good times are expected to roll for the ag retail community as biofuels expansion moves forward. This is projected to have a huge impact on crop selection/input choices as the industry moves through 2007 and beyond. Many new ethanol plants are being built across the country, with 30 new plants opening in Illinois alone during 2006 and another 55 being proposed for construction in the coming year. A few plants are even being built in states outside the Corn Belt such as North Carolina and Washington.

By far the biggest winner among crops with this market shift will be corn, which is needed to supply the many ethanol plants now coming on-stream. Retailers are expecting many of their grower-customers to shift large amounts of acreage in 2007 away from wheat, cotton, and soybeans and into corn as prices improve and supplies tighten. This will have a ripple effect across the entire input sector, with more corn crop protection products, nitrogen-based fertilizers, and biotech corn seed types benefiting the most. Also some companies are developing seed varieties that will cater directly to the biofuels movement.

While the prospects for profitability at the ag dealership are there with biofuels development, the infrastructure to keep this pipeline fed has a few question marks. As some council members pointed out, “going out and growing another 1,000 acres of corn to keep up with demand is not an easy thing to do.” Grain storage also could be an issue and demand for Commercial Driver’s License (CDL) personnel to deliver some of the products within the biofuels pipeline is expected to be high and expensive.

2. Fertilizer

Natural gas prices in the U.S. have finally retreated, but supply remains tight. For the past eight years, demand for fertilizer has outstripped supply in the U.S. market. Globally, big increases in fertilizer demand from countries such as China and India mean many materials once earmarked for the U.S. are being shipped to these markets, which are paying more for the materials than U.S. buyers. At present, approximately half of the nitrogen fertilizer being used in the U.S. comes through imports — and this percentage is expected to keep going up.

Although the numbers for phosphate and potash were down in 2006, both fertilizer types are expected to see increased demand in 2007 as a by-product of the higher demand for corn for the ethanol and animal feed industries.

While demand for fertilizer should improve in 2007, getting it to grower-customers might be a serious concern. In particular, some railroad companies are declining to transport anhydrous ammonia on any of their lines. Since it takes approximately four semi-trucks to equal one railcar in terms of storage space, ag retailers could be facing some serious logistics decisions in 2007. Many retailers are already dropping anhydrous ammonia from their input line-ups and this development could convince several more to abandon the trade in the near term.

3. Crop Protection

During 2006, crop protection products sales declined significantly in favor of seed traits. Retailers are seeing much of the value from this market shift completely to seed sales, which haven’t yet achieved higher margins. Glyphosate seems to be the only active ingredient gaining volume ground, but because of a host of post-patent offerings in this segment, profit margins remain under serious pressure.

With this over-reliance on glyphosate, retailers are seeing more instances of weed resistance than ever before. This is spurring demand for some older chemistries to combat these new breeds of resistant weeds.

4.Seed / Biotech

Many industry insiders view seed as the retailers’ best chance to bring added value to their grower-customers moving forward. The trick will be for retailers to develop methods to build up their seed sales at as quick a pace as their crop protection product sales are falling. This will likely mean dedicating some of their salespeople to devote 100% of their efforts to selling seed.

Triple-stacked seed varieties had a great year in 2006, with many observers reporting 20 to 30 bushel per acre increases compared with traditional varieties. Retailers will probably have more grower-customers looking for these stacked seeds in 2007 to cash in on the higher demand the biofuels movement will have on corn prices.

5. Equipment

The move to limit spray drift is picking up steam once again in the nation’s capital. In 2007, this could mean some new regulations being passed to prevent spray drift damage, potentially impacting custom applicator business. New technologies for individual boom section control could help keep this from being an issue for retailers.

Precision agriculture presents a huge growth opportunity for retailers in 2007, as grower-customers look to improve yields and keep their application expenses in line. Retailers utilizing newer technologies such as automatic steering and advanced GPS systems will most likely be in a position to reap these profits.

Leave a Reply

Management Stories

ManagementAg Industry Shows and Rumors
August 18, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about the upcoming trade show schedule, crop protection merger updates, and content for Read More
ManagementNews from InfoAg 2016 and Weed Wands
August 11, 2016
Editors Paul Schrimpf and Eric Sfiligoj review what happened at last week’s big Precision Ag event and a possible solution Read More
Crop InputsFBN: We’re ‘Here To Stay’
August 11, 2016
PERSPECTIVE — If you’ve been following this site for a while you might remember a certain editorial we published on Read More
Diversified Agri-Services
StewardshipDiversified Agri-Services Certified In 4R Nutrient Stewardship
August 11, 2016
The 4R Nutrient Stewardship Certification Program has announced that Diversified Agri-Services Inc. in McCutchenville, OH, has been added to its growing Read More
Trending Articles
ASMARK 2016 Retailers Live! Tour - CPS
CropLife 100CPS Acquires Texas Retail Operation
August 23, 2016
Crop Production Services (CPS) has acquired the assets of Larry’s Chemical and Spray, Inc., for an undisclosed amount in an Read More
Key Cooperative Marcus Construction Steel Building
Retail FacilitiesMarcus Construction Builds High-Speed Agronomy Center For Key Cooperative
July 7, 2016
Key Cooperative in Grinnell, IA, wanted a state-of-the-art Agronomy Center to better serve its customers. Marcus Construction delivered exactly that. Read More
Heritage Cooperative
Retail FacilitiesKahler Automation Designs State-Of-The-Art Facility For Heritage Cooperative
July 4, 2016
Heritage Cooperative in Marysville, OH, needed an efficient liquid, dry and grain facility to serve the many needs of their Read More
The Andersons Waterloo
ManagementFirst Indiana Facility Certified Under 4R Nutrient Stewardship Certification Program
June 27, 2016
The 4R Nutrient Stewardship Certification Program has announced that The Andersons, Inc.’s Waterloo, IN, facility has been added to its Read More
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
Latest News
Soybean Field
FungicidesSyngenta Launches Interactive Tools For Vibrance Seed T…
August 30, 2016
As part of the ongoing commitment to provide growers and retailers with the most current crop protection products and agronomic Read More
EquipmentAGCO Celebrates Manufacturing In Minnesota
August 30, 2016
AGCO Corp. welcomed the I Make America campaign to its Jackson, MN, factory last Friday to celebrate the contributions of manufacturing Read More
MAGIE 2015 Overview
Eric SfiligojThe Read From MAGIE
August 29, 2016
As I write this column, I’ve just returned from the annual Midwest AG Industries Exposition (MAGIE) in Bloomington, IL. Being Read More
EquipmentAGCO Opens Nominations For 11th Annual Operator Of The …
August 29, 2016
AGCO Corp. is now accepting nominations for 2016 Operator of the Year, which recognizes hard-working applicators across the country. These Read More
CHS St. Paul, MN fertilizer terminal
CropLife 100CHS Completes $10 Million Renovation Of St. Paul Agrono…
August 29, 2016
CHS Inc., North America’s leading farmer-owned cooperative and a global energy, grains and foods company, has completed a $10 million Read More
2016 ShowStopper | Case IH Patriot 4440 Sprayer
Equipment5 Show-stopping Products On Display At 2016 MAGIE
August 26, 2016
For 10 years now, visitors to the yearly Midwest AG Industries Exposition (MAGIE) show have been tasked with voting for Read More
Crop InputsDuPont Pioneer: Corn Belt P and K Levels Lagging
August 24, 2016
A new DuPont Pioneer study conducted across 12 Corn Belt states demonstrates that growers may be leaving profit potential in Read More
Monsanto sign
Crop InputsCould a Monsanto-Bayer Union Be 2 Weeks from Fruition?
August 24, 2016
Via STLToday.com (The St. Louis Post-Dispatch): Merger talks between Monsanto Co. and Bayer AG are advancing after a series of Read More
EquipmentCase IH Debuts Nutri-Tiller 955 Strip-Till Applicator
August 24, 2016
With strip-till continuing to expand across new acres, Case IH designed the new Nutri-Tiller 955 strip-till applicator to help producers Read More
EquipmentCase Launches Aim Command FLEX, 25th Anniversary Patrio…
August 24, 2016
Case IH announces new AIM Command FLEX advanced spray technology for greater application accuracy, as well as special 25th Anniversary Read More
ASMARK 2016 Retailers Live! Tour - CPS
CropLife 100CPS Acquires Texas Retail Operation
August 23, 2016
Crop Production Services (CPS) has acquired the assets of Larry’s Chemical and Spray, Inc., for an undisclosed amount in an Read More
PrecisionAg Video Conference
Precision AgVideo: PrecisionAg Vision Conference
August 22, 2016
A Strategic Conference Focused on the Future of Farm Digitization and Precision Agriculture Visit precisionagvision.com and register today! Read More
Young Corn Plants
Industry NewsOABA Welcomes Nicole Wallace As Communication & Adm…
August 22, 2016
The Ohio AgriBusiness Association has hired Nicole Wallace as its communication and administrative coordinator. Wallace will help provide comprehensive communication Read More
Syngenta Sign
Crop InputsChemChina, Syngenta Receive Clearance From CFIUS
August 22, 2016
China National Chemical Corp. (ChemChina) and Syngenta have announced that the companies have received clearance on their proposed transaction from the Read More
ManagementAg Industry Shows and Rumors
August 18, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about the upcoming trade show schedule, crop protection merger updates, and content for Read More
MAGIE 2015
EquipmentMAGIE Takes The Pulse Of The Ag Retail Industry
August 18, 2016
Every year, one of the major highlights of my career as an ag journalist is attending the Midwest AG Industries Read More
MAGIE 2015 Overview
EquipmentPride In Professionalism On Display At MAGIE
August 18, 2016
The Illinois Fertilizer & Chemical Association (IFCA) is proud to partner with CropLife IRON and continue the tradition of bringing Read More
SprayersJenner Ag To Debut 25th Anniversary Edition Case IH Pat…
August 18, 2016
Visitors at the 2016 Midwest Ag Industries Exhibition (MAGIE) in Bloomington, IL, will have a unique photo opportunity, as Jenner Read More