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

ManagementGROWMARK Meeting Visit, Company Takeover Updates, and RNC Invite
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Other Changes
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More
Corn and ditch
ManagementStudy: Saturated Buffers Reduce Nitrates From Subsurface Field Drainage Systems
July 19, 2016
The Agricultural Drainage Management Coalition (ADMC), Agricultural Drainage Management Systems Task Force and Dr. Dan Jaynes with the National Laboratory Read More
Soybean Field
LegislationOhio Soybean Association Names Brian Hill Legislator Of The Year
July 19, 2016
The Ohio Soybean Association (OSA) has announced that State Representative Brian Hill (R-Zanesville) has been named one of two Legislators of Read More
Trending Articles
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
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
Latest News
ManagementGROWMARK Meeting Visit, Company Takeover Updates, and R…
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
Crop InputsMonsanto: EU Approves Roundup Ready 2 Xtend Imports
July 22, 2016
Monsanto Co. announced today that the European Commission has granted import approval for Roundup Ready 2 Xtend soybeans. This milestone Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSyngenta Announces Alfalfa Seed Split Off
July 22, 2016
On September 1, 2016, Syngenta will transfer sales and distribution of alfalfa seed to the NEXGROW branded business that is Read More
Dow DuPont
Crop InputsDuPont, Dow Shareholders Approve Merger
July 21, 2016
DuPont and The Dow Chemical Company announced that, at their respective special meetings of stockholders held today, stockholders of both Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Oth…
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More
Monsanto Luling Plant
Crop InputsReport: Bayer Shareholder Proposes Monsanto ‘Host…
July 20, 2016
One of Bayer AG’s top 20 shareholders said Wednesday it may make sense for the life-science company to launch an Read More
Young Corn Closeup
Industry NewsNew Leaf Symbiotics Snags Former Monsanto Microbials Le…
July 20, 2016
NewLeaf Symbiotics, announced today the appointment of Dr. Janne Kerovuo as Vice President for Research and Discovery.  Dr. Kerovuo comes Read More
Corn and ditch
ManagementStudy: Saturated Buffers Reduce Nitrates From Subsurfac…
July 19, 2016
The Agricultural Drainage Management Coalition (ADMC), Agricultural Drainage Management Systems Task Force and Dr. Dan Jaynes with the National Laboratory Read More
Case sprayer nozzle closeup
EquipmentAgronomists, CCAs, Custom Applicators Invited To FSR Ag…
July 19, 2016
Agronomists, Certified Crop Advisers (CCA) and custom applicators can stay current on agronomy issues on the grounds of the Farm Read More
Soybean Field
LegislationOhio Soybean Association Names Brian Hill Legislator Of…
July 19, 2016
The Ohio Soybean Association (OSA) has announced that State Representative Brian Hill (R-Zanesville) has been named one of two Legislators of Read More
Eric SfiligojThe Latest Monsanto Rumors: A Game Of Tones
July 18, 2016
When companies are engaged in the back-and-forth of the acquisition game, the tone of their various announcements is always important. Read More
Nozzle spray close-up
AdjuvantsWest Central Distribution Introduces New Elite Family O…
July 14, 2016
West Central Distribution recently released a new line of Elite adjuvants to work alongside the new herbicide technologies that combat Read More
Bayer sign
Crop InputsBayer Makes New Offer For Monsanto
July 14, 2016
Bayer AG boosted its takeover offer for Monsanto Co. to about $65 billion in a bid to overcome the U.S. Read More
ManagementAn Update on Water
July 14, 2016
CropLife Editors Eric Sfiligoj and Matthew Grassi discuss agricultural water issues in conjunction with a recent field trip in Ohio. Read More
Co-Alliance employee
EmployeesNew Purdue Program To Focus On Talent Management
July 14, 2016
Purdue University’s Center for Food and Agricultural Business is starting a new professional development program to help food and agribusiness Read More
Industry NewsFMC Agricultural Solutions Appoints New Global Regulato…
July 14, 2016
FMC Corp. has named Andy Hedgecock as Global Regulatory Affairs Director for FMC Agricultural Solutions. He joins the company this Read More
Corn Field
Seed/BiotechWhat Can Inoculants Do For You?
July 13, 2016
When it comes to preventing disease and promoting growth in your plants, who couldn’t use a helping hand? By forming Read More
Microbes
Seed/BiotechMighty Farming Microbes: Companies Harness Bacteria To …
July 13, 2016
What if farmers, instead of picking up some agricultural chemicals at their local dealer, picked up a load of agricultural Read More