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

Fertilizer Tender close-up
MicronutrientsHow Micronutrients Fit Into 2017 Fertility Plans
January 10, 2017
Where do micronutrients stand going forward in fertility plans? For one thing, Tim Mundorf, Field Representative with Midwest Laboratories, says Read More
Fertilizer application
State of the IndustryCautious Optimism On Fertilizer In 2017
January 10, 2017
What kind of fertilizer rates are growers and retailers looking at in 2017 and beyond? According to stakeholders CropLife magazine Read More
Asmus Farm Supply crop protection products in storage
State of the IndustryCrop Protection Products Market: Complexity Begets Opportunity
January 10, 2017
While other key market segments in agriculture continue to see tumultuous shifts in sales volumes going forward (large equipment sales are Read More
Pioneer corn seed in storage
Special ReportsState Of The Seed Industry: Better Later Than Never
January 3, 2017
Traditionally, the majority of the nation’s grower-customers made their seed planting decisions in the late fall. Normally, when folks attended Read More
Trending Articles
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
AgriSync
Matt Hopkins17 Agriculture Apps That Will Help You Farm Smarter In 2017
December 9, 2016
Ag professionals are working smarter, not harder, than ever before. Smart farming technologies have enabled them to reduce costs, maximize Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Precision AgTrimble Debuts End-to-End FMIS Platform
November 28, 2016
October’s inaugural PrecisionAg Vision Conference left this author with many thoughts and things to ponder in the coming months. Probably Read More
CHS Primeland
CropLife 100The 2016 CropLife 100 Report: Reviewing The Many Bulls And Bears Impacting This Year’s Marketplace
November 28, 2016
For virtually all of 2016, the nation was wholly focused on the big Presidential election. Some folks aligned themselves with Read More
Latest News
EquipmentAGCO Parts Revamps Sprayparts.com For Faster, Easier On…
February 28, 2017
AGCO Parts, a division of AGCO Corp., a worldwide manufacturer and distributor of agricultural equipment, has redesigned and improved Sprayparts.com, Read More
Soybean Plant closeup
HerbicidesRegional Listening Sessions Give Farmers A Voice In The…
February 27, 2017
Both scientists and regulators have had a lot to say about the growing problem of herbicide resistance and how weed Read More
Greystone Construction built the tension membrane fertilizer storage building (left) and steel seed treater building (right)
CropLife 100Pinnacle Announces Successful Exchange Offer Results An…
February 27, 2017
Pinnacle Agriculture Holdings, LLC has announced today the early tender results of its previously announced offer to exchange (the “Exchange Read More
IEI Barge Fertilizer Potash Port Terminal
EquipmentLegacy Building Solutions Receives Design-Build Merit A…
February 27, 2017
When IEI Barge Services needed a building capable of storing and loading fertilizer, they turned to Legacy Building Solutions to Read More
ManagementSouth Africa Update and the New New Leader G5
February 24, 2017
Editors Eric Sfiligoj and Dan Jacobs discuss the recent visit to South Africa by sister magazine AgriBusiness Global and the Read More
Fall Creek Watershed
StewardshipUpdate: Nutrient Stewardship In Indiana Requires Cool, …
February 24, 2017
Update: The application deadline for NCRS funding has been extended to March 17, 2017. Green leaves sparkle in the sunlight. Trees Read More
Greenleaf Technologies TADF03-D Dual Fan Nozzle
NozzlesSix Greenleaf Nozzles Approved For XtendiMax With Vapor…
February 22, 2017
Greenleaf Technologies has announced that six of its TurboDrop D Series nozzles have been approved for use with Monsanto’s XtendiMax Read More
Winter Wheat
Industry NewsTiger-Sul Hires Manitoba And Eastern Canada Account Man…
February 22, 2017
Tiger-Sul, a global leader in sulphur fertilizers and crop performance products, has announced that sales veteran Trevor Loewen has joined Read More
NFMS 17 Hagie Sprayer
Eric SfiligojThe Read From Louisville: Uncertain
February 22, 2017
By the time this column appears across the country, the annual Commodity Classic will be in full swing. This means Read More
SprayersApache 1000 Series Sprayer Earns 2017 EquipmentWatch Hi…
February 21, 2017
ET Works has been named a winner in the 2017 EquipmentWatch Highest Retained Value Awards program, the industry’s only award Read More
Measuring Bulk Tanks
StewardshipMeister Media Among 2017 Award Winners Presented By The…
February 21, 2017
The Pesticide Stewardship Alliance (TPSA) held its annual conference in San Diego, CA, earlier this month where three awards were Read More
John Reifsteck
CropLife 100GROWMARK’s Reifsteck Earns NCFC Director Of The Y…
February 21, 2017
GROWMARK Chairman of the Board and President John Reifsteck has earned the prestigious Director of the Year Award from the Read More
Roy Blunt
LegislationARA Recognizes Blunt, Heitkamp For Legislative Efforts …
February 17, 2017
Agricultural industry continues to face federal regulatory challenges. Thankfully, agriculture’s allies in the U.S. Senate stepped forward. The Agricultural Retailers Read More
LegislationThe Fertilizer Institute Commends Senate On Confirmatio…
February 17, 2017
The Fertilizer Institute (TFI) President Chris Jahn issued the following statement on the Senate confirmation of Oklahoma Attorney General Scott Read More
Trump, Senate, Cabinet
LegislationBREAKING: Trump EPA Nominee Scott Pruitt Confirmed by S…
February 17, 2017
Scott Pruitt, who as Oklahoma’s attorney general spent years suing the Environmental Protection Agency over its efforts to regulate various Read More
ManagementFebruary Road Trip Edition
February 17, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent visits to Indiana and Kentucky. Read More
Heritage Cooperative Finished Building Aerial
ManagementHeritage Cooperative, Agland Co-op Approve Merger
February 17, 2017
Agland Co-op and Heritage Cooperative stockholders have both approved the merger agreement between Agland Co-op and Heritage Cooperative. Now begins Read More
LegislationARA Fly-In: Ag Retail Descends on Capitol Hill, Lawmake…
February 15, 2017
More than 100 agricultural retailers, distributors and suppliers headed to Capitol Hill Tuesday morning for the Agribusiness Congressional Fly-in, according to a Read More