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 IndustryFertilizer Bracing For Slower Demand In 2015
January 5, 2015
Following a rough 2014, ag retailers expect 2015 to remain a challenge for crop nutrient sales for a variety of reasons. Read More
Crop Protection Bulk Storage
State of the IndustryCrop Protection Rise To Continue
January 4, 2015
Economics may tempt growers to reduce pesticide use, but ensuring yields may be more important. Read More
State of the IndustryYields Start With The Seed
January 3, 2015
There’s a reason seed sales were up in 2014 — new varieties are delivering the goods. Read More
Special ReportsUSDA Announces Funding To Train And Educate Next Generation Of Farmers
April 14, 2014
Nearly $20 million in grants to help train, educate and enhance the sustainability of the next generation of agricultural producers is available through the Beginning Farmer and Rancher Development Program. Read More
Top 100 Articles
CropLife 100United Cooperative Acquires Four ADM Wisconsin Facilities
November 12, 2015
United Cooperative, based out of Beaver Dam, WI, recently acquired four grain and agronomy locations from Archer Daniels Midland (ADM) Read More
CropLife 100BRANDT Car Makes NASCAR Xfinity Series
October 29, 2015
BRANDT will join JR Motorsports with driver, Justin Allgaier, for the 2016 NASCAR Xfinity (NXS) Series season. Allgaier will pilot Read More
CHS Building exterior
CropLife 100CHS Leaders Help Shape Succession Report
October 22, 2015
Succession planning was listed as a main concern of cooperative leaders at this summer’s 15 regional CHS owner town hall Read More
Fall Harvest
CropLife 100Pinnacle Purchases Eight Regional Seed Companies
October 12, 2015
Pinnacle Agriculture Holdings has announced the purchase of eight regional seed companies to advance its seed business. Pinnacle has acquired: Read More
MRM Agricultural Service
CropLife 100Pinnacle Acquires CropLife 100 Ag Retailer
October 8, 2015
Pinnacle Agriculture Holdings, LLC has successfully acquired the Missouri-based agronomy business of MRM Agricultural Service, LLC and its affiliates (MRM). Operating Read More
Eric Jenks, Wilbur-Ellis
CropLife 100Wilbur-Ellis Opens Dry Fertilizer Storage And Blending Facility In Washington
October 8, 2015
Wilbur-Ellis Co., ranked No. 4 on the CropLife 100, has constructed and opened a 22,000-ton dry fertilizer storage and blending Read More
Latest News
HerbicidesBREAKING: EPA Pulls Registration On Dow’s Enlist …
November 25, 2015
EPA on Wednesday withdrew approval of a controversial new weed killer to be used on genetically modified corn and soybeans, Read More
FertilizerYara Tampa Ammonia Terminal Garners ResponsibleAg Honor…
November 25, 2015
Yara has received its first ResponsibleAg Certification for its Tampa, FL, Ammonia terminal location. This achievement demonstrates Yara’s commitment to Read More
ManagementReviewing The Top Ag Stories For 2015
November 24, 2015
Editors Eric Sfiligoj and Paul Schrimpf discuss the most noteworthy events from this past year in agriculture. Read More
EmployeesAgriculture Jobs May Be Plentiful, But New Grads Are Sc…
November 24, 2015
Close to 60,000 jobs are set to open up in agriculture each year for the next five years, but there's not enough grads to fill them. Read More
Radish cover crop
StewardshipCover Crops Guide Helps Growers Improve Water Quality
November 23, 2015
A publication that teaches growers the advantages of using cover crops to improve soil health and crop yields has won Read More
Crop InputsThe Andersons’ Products Receive California Organi…
November 23, 2015
The Plant Nutrient Group of The Andersons, Inc. announced today that its Humic DG and Black Gypsum DG products are Read More
Eric SfiligojNew European Study Seems To Support Glyphosate Safety
November 23, 2015
Looking at any international news over the past few years, it might seem as if the European Union (EU) is Read More
Toggle Biostimulant corn roots
Crop InputsTwo New Biostimulants Added To United Suppliers’ …
November 20, 2015
Winfield US announces the launch of two new products in the United Suppliers portfolio for the 2016 crop season, Optify Read More
StewardshipNRDC Report: Cover Crops Contain Vast Benefits
November 19, 2015
As harvest season ends and farmers in the United States ready themselves for winter, one small change could make a Read More
Fall Harvest
Seed/BiotechArysta Launches New Seed Protectant
November 19, 2015
As spring wheat growers begin planning for a strong start to their season, Arysta LifeScience North America announces RANCONA V Read More
Crop InputsInocucor Receives U.S. Patent For Microbials
November 19, 2015
Inocucor Technologies Inc., the Montreal-based agriculture biotech company, was issued patent No. 9,175,258 by the U.S. Patent and Trademark Office to protect Read More
ManagementSyngenta Rumors and ARA 2015 Preview
November 19, 2015
CropLife Editor Eric Sfiligoj looks at the latest rumors involving Syngenta selling its crop protection business and talks about events Read More
EquipmentAGCO Announces Finalists For Operator Of The Year Honor
November 19, 2015
AGCO Corp. has announced the four top operators chosen as finalists for AGCO’s 10th Annual Operator of the Year program, Read More
High Plains Aquifer
StewardshipStudy: High Plains Aquifer Overall Usage In Decline
November 18, 2015
A new Kansas State University study finds that the over-tapping of the High Plains Aquifer’s groundwater beyond the aquifer’s recharge Read More
Golden Harvest Corn healthy leaves
FungicidesArysta Launches New Corn And Soybean Fungicide
November 17, 2015
Arysta LifeScience North America has recently launched ZOLERA FX Fungicide. The highly systemic, powerful fungicide delivers broad-spectrum disease control with Read More
Young corn plants in soil
Crop InputsBioAg Alliance: Microbials Targeted For 250-500 million…
November 17, 2015
Monsanto and Novozymes have announced a new 2025 acreage target that will guide the companies’ microbials business for the next Read More
Syngenta Sign
Crop InputsSyngenta Still Being Eyed For China Takeover
November 16, 2015
China National Chemical Corp. approached sovereign wealth funds including China Investment Corp. to help pay for a potential acquisition of Read More
Cedar Country Cooperative
Eric SfiligojCooperative Consolidation Continues
November 16, 2015
As I put this enewsletter column together, we’ve just put the finishing touches on our magazine’s annual CropLife 100 report. Read More