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

ManagementThe Latest Dow-DuPont Rumor, Product of the Year Voting Update, and CropLife 100 Preview
October 20, 2016
CropLife Editor Eric Sfiligoj shares a new rumor about the Dow-DuPont merger and updates on two CropLife-driven programs, the CropLife Read More
ManagementHarvest and Crop Price Updates; EPA and Crop Protection Reviews
October 13, 2016
Glyphosate and atrazine get public comment support from ARA as each is reviewed by EPA, and the latest on the Read More
ManagementVision Conference Preview, Monsanto Earnings, and Product of the Year Voting
October 7, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about the upcoming PrecisionAg Vision meeting in Arizona, Monsanto’s latest revenue numbers, and Read More
EmployeesOABA Program Develops Future Generation Of Agribusiness Leaders
September 29, 2016
The Ohio AgriBusiness Association will select up to 25 promising leaders to participate in a leadership enhancement program early next Read More
Trending Articles
AGCO RG700 cab
OpinionRoadblocks To Precision Ag Innovation
October 5, 2016
On August 29, I got to preside over the PrecisionAg Innovation Series event, “Game-Changing Advances in Precision Farming Technology,” developed Read More
J.C. Ramsdell containment system
EquipmentClear Opportunity In The Tank Market
October 4, 2016
Crop prices may be down, but steel prices are too — and that’s good news for retailers looking to add some Read More
WinField booth Farm Progress
Special ReportsTalking Weed Management Strategies At Farm Progress 2016
October 2, 2016
The annual Farm Progress Show — this year staged in Boone, IA — is always a great place to catch Read More
Corn Field
Eric SfiligojFacing Ag Industry Challenges
September 26, 2016
At the 2016 annual Mid America CropLife Association (MACA) meeting in September, a pair of crop protection company representatives discussed Read More
Bayer Monsanto
Crop InputsBayer-Monsanto Mega-Merger: 6 Things You Need To Know
September 14, 2016
Mega mergers have become almost routine in the agricultural industry. Right on the heels of Monday’s news that fertilizer giants Potash Read More
Potash Corp Agrium
Crop InputsAgrium, Potash Corp To Merge To Create $36 Billion Company
September 12, 2016
Canada’s Agrium Inc. and Potash Corp of Saskatchewan Inc. have agreed to combine in a deal that would create a Read More
Latest News
Kennebec Grain terminal
CropLife 100Wheat Growers Kennebec Facility Loads First Rail Cars
October 21, 2016
In a season of firsts for Wheat Growers’ Kennebec Grain Terminal, the first 115-car unit train was loaded with soybeans Read More
ManagementThe Latest Dow-DuPont Rumor, Product of the Year Voting…
October 20, 2016
CropLife Editor Eric Sfiligoj shares a new rumor about the Dow-DuPont merger and updates on two CropLife-driven programs, the CropLife Read More
Soybean Closeup
FungicidesFMC Begins Registration Process For New Fungicide Activ…
October 19, 2016
FMC Agricultural Solutions has begun the joint U.S. EPA and Canadian Pest Management Regulatory Agency registration process for bixafen, a new Read More
Soil Young Corn
Industry NewsAgribusiness Search Firm Appoints New Managing Partner
October 18, 2016
Morris Bixby Group, a leading agribusiness search firm providing the highest quality professional recruiting and career advancement services since 2000, Read More
Wheat Field North Dakota
FertilizerUnited Suppliers Acquires Kansas Fertilizer Business
October 17, 2016
United Suppliers, Inc. has purchased the assets of Evans Enterprises, LLC, an ammonium chloride fertilizer business based in Olathe, KS. Read More
Corn Field
Industry NewsFMC Launches New Operations In Argentina, Exits Joint V…
October 17, 2016
FMC Corp. has exited its joint venture with Ruralco Soluciones S.A. FMC has launched new commercial operations, FMC Quimica S.A., Read More
Dow AgroSciences
InsecticidesRenewed Registration Issued For Products Containing Sul…
October 17, 2016
On October 14, 2016, the U.S. EPA re-established the registration of products containing sulfoxaflor (Isoclast Active), including Transform WG, Closer Read More
Eric SfiligojThe Whys Of Agriculture
October 17, 2016
During 2016, there have been myriad challenges facing the whole agricultural industry. Such wide ranging issues as water protection, sustainable Read More
Young Corn Field
FertilizerImproved Phosphorus Management Essential To Feeding Wor…
October 14, 2016
With a global population expected to reach 9 billion people by 2050, improved management of key essential nutrients such as Read More
ManagementHarvest and Crop Price Updates; EPA and Crop Protection…
October 13, 2016
Glyphosate and atrazine get public comment support from ARA as each is reviewed by EPA, and the latest on the Read More
Matt Hopkins15 Twitter Accounts Every Ag Professional Must Follow
October 13, 2016
What do singer Katy Perry and the President of the United States have in common? They are two of the Read More
Corn Field
Industry NewsArysta LifeScience Adds Two Key Account Managers
October 13, 2016
Arysta LifeScience North America recently announced the addition of two key account managers: Doug Hoberty and Rob Wier. Hoberty and Read More
EquipmentDeere Announces Development Deal with Scherer Design
October 12, 2016
Deere & Co. announces a joint development agreement with Scherer Design Engineering, Inc. to develop and commercialize kernel processing solutions Read More
Crop InputsMarrone Bio Innovations Celebrates 10 Years Of Innovati…
October 12, 2016
Richard Rominger, former Deputy Secretary of the USDA and former agricultural secretary of California, emceed a 10th anniversary luncheon celebration on Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Industry NewsVive Crop Protection Closes Financing To Support Corpor…
October 11, 2016
Vive Crop Protection has announced the closing of growth financing to support 2017 commercial expansion. The financing was led by Read More
SoftwareHD Precision Analytics Launches New Mobile App For Agri…
October 11, 2016
AGSentry from HD Precision Analytics is a Software-as-a-Service (SaaS) platform that offers simple data service and actionable analytics tool. It focuses Read More
HerbicidesWeed Control And Soil Health Go Hand-in-Hand
October 10, 2016
Although many landowners may not give much thought to weed control as a soil health measure, Gared Shaffer, South Dakota Read More
Students Soybean Field
Eric Sfiligoj2016 Young Leaders Speak
October 10, 2016
One of the consistent cries in agriculture today is the need to try and connect with the younger generations, attempting Read More