Fertilizer Returns As Market Leader For Top Ag Retailers

Fertilizer Pile

Ask anyone who follows the ag retail marketplace regularly to name one crop input that consistently has driven industry growth since 2000, and chances are the answer back will be the word “fertilizer.” Indeed, from a base of less than 40% at the start of the century, fertilizer has constantly outperformed the rest of crop inputs and services represented in the annual CropLife 100 survey of ag retailers, growing to account for more than half of all sales.

Of course, there has been one very important exception to this general rule of thumb — 2008. Early in that year, fertilizer was riding high on both price and usage, spurred on by a record number of corn acres being planted by growers hoping to take advantage of the then-exploding market for ethanol. Very quickly, fertilizer prices rose and all crop nutrients kept pace. For example, in August 2008, sulfur was selling for more than $800 per ton. Based upon recommendations by industry experts and producers, ag retailers kept buying all crop nutrients at these inflated prices, banking on the fact that still higher prices were just a few days down the line.

But then, the bottom dropped out of the market. Crop prices stumbled, which caused growers to virtually stop buying fertilizer for fall application work in 2008. Just as quickly, fertilizer prices tanked and the same sulfur that was selling for $800 per ton in August could be had for as little as $50 per ton by year’s end. Consequently, ag retailers were forced to write down hundreds of million dollars of fertilizer inventory at the end of 2008. Fertilizer sales, which had been on an impressive growth curve toward $10 billion among CropLife 100 retailers during 2007, retreated to $9.2 billion instead and a 49% share of all input sales.

“Clearly, 2008 was a watershed year for fertilizer,” said The Fertilizer Institute President Ford West at an industry roundtable discussion held in January 2009. “It was cheap and plentiful and had always been there. Then everything changed and everyone was caught unprepared.”

A Nice Recovery

During 2010, fertilizer sales did manage to regain 10% of their value, topping the $10.1 billion and holding steady at a 49% market share, according to the CropLife 100 survey. But could these gains hold in 2011?

Luckily for the industry, the answer to this question was an emphatic “yes!” According to CropLife 100 retailers, their fertilizer sales topped $12.7 billion in 2011, up an impressive $2.5 billion from 2010. Better still, since this 25% growth rate easily topped the industry average, market share for fertilizer has increased to 53%. This not only represents a high-water mark for fertilizer sales within the CropLife 100, but is an incredible 11% market share bump from the percentage of crop input sales fertilizer represented in 2000.

For 2011, all parts of the fertilizer segment were up. According to CropLife 100 respondents, 87% of them had fertilizer sales increases this year ranging from 1% to more than 5%. Only 9% reported fertilizer sales declines ranging from more than 5% to 1% while 4% saw flat fertilizer sales. Likewise, 83% of CropLife 100 retailers had increased micronutrient sales compared with 6% recording declining sales and 11% with their sales holding steady.

“There’s no question fertilizer was the biggest gainer when it came to sales volume during 2011,” says Steve Mossbarger, facility manager for the Crop Production Services location in Washington Court House, OH. “We were literally shipping out fertilizer almost as fast as we could get it out of our storage houses all season long.”

Less Urgency On Contracts

With things going along so well in the fertilizer segment, ag retailers seem content to let traditional market practices run the show. For example, take fertilizer contracts.

Back during the crash of 2008, there was a massive cry from ag retailers for the use of formal fertilizer contracts with their customers. This was motivated by the need to protect themselves and their businesses from grower-customers backing out of handshake agreements to purchase fertilizer at a set (and normally, higher) price. In fact, J. Stephen Lucas, president of Jayhawker Consulting Co., LLC, addressed this industry call at the annual Agricultural Retailers Association (ARA) meeting in late 2009.

“In the grain business, using contracts is second nature,” said Lucas. “We don’t do anything without that confirmation. I’m horrified that people buy and sell stuff without contracts. Sure, you can view your grower-customers as friends and good old buddies, until there’s a $100 per ton difference in the fertilizer price. Then, without a formal contract in place, you may find out that grower-customer isn’t such a good old guy after all.”

As a result, ARA formed the Fertil­izer Contract Task Force with the objective of developing an association-branded fertilizer contract confirmation that specifies the mutual agreed upon terms of buyer and seller between any two businesses. A sample of this document was introduced to ag retailers shortly thereafter with the hope that it would be adopted by the industry as a new standard for doing business.

But this apparently hasn’t happened. When CropLife 100 retailers were asked to gauge the following statement — most retailers use fertilizer contracts — 66% said this wasn’t the case. Only 34% said this statement was true. According to some retailers, the use of contracts is still a very selective process.

“In our market, we only use the ARA contracts for our urea,” says Bill Hubbell, general manager for Wilco-Winfield in Mt. Angel, OR. “It hasn’t made sense for us to use them with our other fertilizer sales, however.”

Of course, some ag retailers say the results from the CropLife 100 survey don’t tell the whole story. “Contracts are out there and being used,” said one retailer at a recent industry roundtable event. “Everyone I know wants to protect themselves from an unexpected market downturn, and formal contracts with growers allow you to do this.”

So perhaps this issue will once again gain some industry traction if the ag market really is in the midst of a second economic bubble, as some analysts believe. If this happens and the market unexpectedly turns south, the call for fertilizer contracts could once again get louder.

Leave a Reply

State of the Industry Stories
State of the IndustryAgriculture’s Troubled Waters
March 3, 2014
Water quantity and quality issues threaten to hamper agriculture on a wider scale in the not-too-distant future. Technology breakthroughs and improved practices are providing potential solutions. Read More
State of the IndustrySponsor Profiles: Simplot, SST And WinField Support CropLife State Of The Industry Report
January 8, 2014
The sponsor partners of the CropLife State of the Industry report have demonstrated ongoing leadership including their support of this report. Read More
State of the Industry2014 State Of The Industry: Agricultural Concerns Creep In
January 2, 2014
With many strong sales years under its belt, the agricultural community is hoping for another positive growth experience in 2014, but mindful of a few challenges that might keep this from happening. Read More
State of the IndustrySeed Systems Top Watch List
January 2, 2014
Retailers are closely following herbicide tolerance and drought resistance traits. Read More
Top 100 Articles
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Match Made In Deviation
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More
Winter Wheat
CropLife 100South Dakota Co-op Member Owners Vote No On Unification
June 26, 2015
The Boards of Directors for North Central Farmers Elevator (NCFE) and Wheat Growers (WG) have announced that member-owners have voted Read More
CropLife 100The Andersons Acquires South Dakota Plant Nutrient Manufacturer Kay-Flo
May 20, 2015
The Andersons, Inc., ranked No. 22 on the CropLife 100, has purchased Kay Flo Industries of North Sioux City, SD. “This Read More
CropLife 100AgGateway’s Barcoding Initiative Progressing Nicely
May 8, 2015
According to legend (or Wikipedia), the first step towards modern bar codes came back in 1948, when Bernard Silver, a Read More
CropLife 100Pinnacle Agriculture Acquires Minnesota Retailer
April 14, 2015
Pinnacle Agriculture Holdings, LLC, ranked No. 6 on the CropLife 100,  has successfully acquired Liebl Ag, LLC in Ada, MN.  Read More
CropLife 100CHS, Aurora Cooperative Complete Fertilizer Storage, Grain Shuttle Loading Facility
April 13, 2015
CHS Inc., the nation’s leading cooperative and ranked No. 5 on the CropLife 100, and Aurora Cooperative (ranked No. 21) Read More
Latest News
Topcon AGI-4 on MF Planter
EquipmentAutosteer: Compatibility, Accuracy Remain Top Of Mind
July 3, 2015
The world of automatic steering solutions in agriculture has evolved rapidly in the last few years. From after-market add-ons that Read More
ManagementUnited Suppliers/Land ‘O Lakes Merger & Crop Update
July 2, 2015
CropLife’s Paul Schrimpf and Eric Sfiligoj talk about the reasons behind the United Suppliers/Land ‘O Lakes merger and USDA’s recent Read More
Industry NewsBioSafe Adds To Sales Force
July 2, 2015
BioSafe Systems has announced the hire of two new members for its service team. David Britt recently joined the team Read More
Chesapeake Bay
ManagementChesapeake Bay Clean-Up Gets Renewed Attention
July 2, 2015
The Chesapeake Bay has been called one of the most biologically productive ecosystems in the world. It’s also one of Read More
Measuring Bulk Tanks
ManagementBulk Pesticide Compliance: Top 10 Areas Of Improvement …
July 1, 2015
  In honor of the 33-year run of David Letterman’s Late Show, the American Agronomic Stewardship Alliance (AASA) is happy Read More
Industry NewsArysta North America Hires Midwest Sales Manager
July 1, 2015
Arysta LifeScience North America recently announced the hiring of Brian Battles as the Senior Technical Sales Manager for the Midwest Read More
Farmer on tablet
Eric SfiligojThe Never-Ending Battle Against Modern Agriculture
July 1, 2015
In the world of comic books, the character of Superman often refers to the fight to save the world as Read More
Retail FacilitiesBuilding Up Ag Retail
July 1, 2015
In the oftentimes unpredictable world we live in, it’s nice to know some things can be reliably countered on to Read More
Retail FacilitiesMaple River Grain And Agronomy Phases In Site Developme…
July 1, 2015
Marcus Construction helped Maple River Grain and Agronomy in Casselton, ND, with the design-build of its dry fertilizer, liquid chemical/seed Read More
Retail FacilitiesA&B Welding Builds A New Liquid Terminal Hub For Br…
July 1, 2015
To build its new hub facility, Briggs Crop Nutrients enlisted the help of A&B Welding. The result, an efficient facility Read More
Edon Farmers Co-op
Retail FacilitiesNew Marcus Facility At Edon Farmers Co-op Provides More…
July 1, 2015
Edon Farmers Co-Op in Edon, OH, needed a new facility to consolidate outdated locations. Marcus Construction was able to design Read More
Retail FacilitiesKinder Morgan Expands Its Storage With A New Dome Barre…
July 1, 2015
Kinder Morgan wanted additional covered storage at its Dakota Bulk Terminal on the Mississippi River in St. Paul, MN. With Read More
Retail FacilitiesHeartland Tank Protects Fertilizer From Extreme Cold At…
July 1, 2015
The Arthur Companies in Harvey, ND, enlisted the help of Heartland Tank Companies to develop a new liquid fertilizer facility Read More
The McGregor Co. fertilizer loadout
Retail FacilitiesThe McGregor Co. Partners With Kahler Automation To Cre…
June 30, 2015
Kahler Automation helped The McGregor Co. expand its Clarkston, WA, operation with unstaffed loadout technology that enables customers to pick Read More
Dry and Liquid Plant
Retail FacilitiesKahler Automation Helps CHS Dakota Ag Cooperative Build…
June 30, 2015
CHS Dakota Ag Cooperative in Mooreton, ND, wanted a liquid/dry blender system that could meet the needs of its customers Read More
Crop InputsLand O’Lakes, United Suppliers To Merge Crop Inpu…
June 29, 2015
Land O’Lakes, Inc. and United Suppliers, Inc. of Ames, IA, today announced their intent to merge their crop inputs businesses. Read More
FungicidesHelena To Distribute Unique Summit Agro Fungicide
June 29, 2015
RANMAN 400 SC fungicide, the only fungicide with a FRAC group 21 designation, is now part of the innovative Summit Read More
Eric SfiligojIARC Targets 2,4-D In Latest Report
June 29, 2015
The International Agency for Research on Cancer (IARC) has struck again. Earlier this year in March, this agency of the Read More