Fertilizer Contracts Now A Must?

Ag retailers learned many lessons about the fertilizer business following the rollercoaster ride of price hikes and crashes that occurred in 2008. The question on everyone’s mind was the same — how can our industry avoid this kind of financial meltdown in the future?

Since then, ag retail has shifted from a “handshake industry” toward one where formal fertilizer contracts are more prominent. This hot topic has made its way into the Ag Retailers Association’s (ARA) online discussion forum, where Duane Holicky, agronomy manager, Genesis Co-op, posted this commented:

“We started doing grower fertilizer contracts about 5 years ago because we started selling fall applied ammonia in January of that year and realized that our suppliers were very serious about the stipulations in the contracts they have us sign,” he said. “We decided to protect ourselves in the same way knowing that if we couldn’t take all of the ammonia by the end of December that we would pay the penalty or they would keep our prepay money and reprice the product if it went higher. How else can you eliminate some of that risk if you don’t have contracts and hold to them?”

Holicky said his company basically mimicks the vendors’ contracts with a shorter version for its own grower-customers. To read Holicky’s full comment and/or to add a comment of your own, visit ARA’s online forum here.

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