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

Liquid Fertilizer Storage tanks
State of the IndustryComplex Fertilizer Market Brings Mixed Feelings
January 5, 2016
Declining fertilizer prices and plentiful supplies should be good news for growers facing low crop prices. But they and their Read More
Asmus Farm Supply crop protection products in storage
State of the Industry2016 Crop Protection Outlook: The Guessing Game
January 4, 2016
One would naturally assume that retail sales of crop protection products in a contracted market would themselves be contracted, but Read More
Seed corn bags in storage
Special ReportsThe Outlook For Seed In 2016
January 3, 2016
Among all crop input categories going into 2016, the seed category has as many questions regarding which direction it will Read More
Wilbur-Ellis’ new fertilizer blending facility, located in Mott, ND, was designed by A.J. Sackett & Sons.
State of the IndustryBuying Intentions Survey: Retailers Taking A Prudent Approach In 2016
January 2, 2016
The CropLife® magazine Buying Intentions Survey made its debut last year to gauge current industry trends against the retailer’s plans Read More
Trending Articles
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
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
Latest News
Soybean field
Crop InputsIncotec Invests In North America
October 25, 2016
Leading seed enhancement company Incotec, part of Croda, has announced an investment in their North America business. The total investment of Read More
Patriot 25th anniversary
SprayersCase IH Celebrates 25 Years Of Patriot Sprayers At Bens…
October 24, 2016
Case IH executives, employees and special guests celebrated 25 years of production of Case IH Patriot sprayers in a special Read More
4r Nutrient stewardship
StewardshipNominations For The 4R Advocate Program Due October 31
October 24, 2016
Nominations for the 4R Advocate program are due to The Fertilizer Institute by October 31, 2016. The program recognizes agricultural Read More
Corn close up
Eric SfiligojProtecting Agriculture’s Ability To Feed The World
October 24, 2016
The rate of change coming to agriculture is growing, and will continue to do so for the foreseeable future. This Read More
Student Young Worker CHS
CropLife 100CHS Supports #FirstJob Compact
October 24, 2016
CHS joins the White House and many of the country’s largest employers in signing a new initiative centered on helping Read More
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