A Precarious Fall

For the past several years, fall has been a profitable time for ag retailers. Healthy harvests and decent crop prices have helped grower-customers be flush with cash to spend. On average, the total crop input market has enjoyed annual 3% to 4% gains.

This doesn’t seem to be the case in 2006, however. After starting out with the promise of continued sales growth, ag retailers have largely not seen these projections pan out. Based upon current sales forecasts and advance fall input orders, 2006 looks like it will be the first year since 1991 that the aggregate crop input market in the U.S. will suffer a volume decline. Particularly hard hit will be crop nutrients, predicted to be down 8% to 10% by year-end, and crop protection products, off an estimated 5% as more grower-customer business shifts to trait-laden bioengineered seed.

As for the reasons for this decline, you can take your pick. Some experts say volatile energy prices (including natural gas and diesel fuel) convinced distributors to delay fertilizer purchases. In other cases, retailers chose to cut back their fertilizer inventories to make certain bins were empty at the end of the spring season.

Others point the finger more directly at grower-customers for the downturn. “Because of low corn and wheat prices and high energy input costs, U.S. farmers have been drawing down soil nutrient levels without replacing those nutrients,” says David Delaney, president of PCS Sales.

Either way, everyone who observes the market agrees that the 2006 fall season will be slower compared with the past few years.

Despite this news, market analysts predict that the 2006 crop input volume decline won’t have much staying power. As evidence, they point to several developments that should lead to a brighter outlook in 2007. First off, fertilizer prices appear to be stabilizing. Natural gas prices — which had been rapidly climbing since 2003 — are projected to fall approximately 10% going into the winter. This could convince nitrogen-based fertilizer suppliers to bring additional production on-stream. Passage of the Gulf of Mexico Energy Security Act, allowing for expanded natural gas drilling in the outer continental shelf, should also help. In addition, three urea plants in Egypt, Saudi Arabia, and the United Arab Emirates have come online earlier than expected. Combined, these plants are capable of exporting 2 million metric tons of product to the U.S., keeping prices soft.

Second — and perhaps more importantly — crop demands are on the upswing. According to USDA, corn demand will exceed production this year by nearly 1 billion bushels, severely curtailing the nation’s carryover supply. Much of this need is coming from the ethanol industry as efforts to find alternatives to fossil fuels ramp up. Long-range forecasts now project corn-planted area in the U.S. will top 85 million acres by 2009, an increase of 7% from today’s total. According to Dan Froehlich, U.S. agronomy manager for The Mosaic Co., this will undoubtedly lead to increased fertilizer applications in the coming years.

The bottom line from all these bits of data is simple — while retailers may be in a precarious position during fall 2006, the downturn shouldn’t last. The future looks to be brighter, for plenty of seasons to come.

Leave a Reply

Latest News
UncategorizedPrecision Ag, Iowa Water, and GM Corn Updates
March 24, 2017
Editors Paul Schrimpf and Eric Sfiligoj look at the state of precision agriculture, the dismissal of the Des Moines Water Read More
Pam Marrone
Crop InputsMarrone Bio Innovations Enters Biostimulants Market Wit…
March 23, 2017
Marrone Bio Innovations, Inc. is expanding beyond biopesticides and crop protection and into the biostimulant market by commercially launching Haven Read More
Nutrients for Life Foundation Teacher
FertilizerNutrients For Life Foundation Celebrates 10 Years Teach…
March 23, 2017
Those in agriculture know fertilizer is a vital ingredient to grow strong, productive crops. In fact, fertilizer is responsible for Read More
ManagementThink You Know Water? Take WinField United’s R…
March 22, 2017
Water is among our most precious resources, and arguably the hardest working, with just one percent available for human use, Read More
Corn Field
LegislationTFI Hopes Court Dismissal Is ‘Final Chapter’…
March 20, 2017
The Fertilizer Institute (TFI) released the following statement from President, Chris Jahn on the March 17, 2017, federal court dismissal Read More
Wheat Growers
Industry NewsWheat Growers CEO Dale Locken To Retire
March 20, 2017
CEO Dale Locken has announced that he plans to retire from Wheat Growers. Locken has served almost 15 years as Read More
Bayer Monsanto
Eric SfiligojBayer-Monsanto: Life, LibertyLink, And The Pursuit Of R…
March 20, 2017
As the calendar officially turns to spring, life is in full renewal mode. Flowers are blooming, birds are singing, and Read More
Corn Field
Crop InputsUltra Yield Micronutrients Acquires Kronos Micronutrien…
March 16, 2017
Ultra Yield Micronutrients, Inc. ”Ultra”, an affiliate of Cameron Chemicals, Inc., is pleased to announce that it has acquired the Read More
ManagementSnowstorms, Asset Sales, and Soybeans Prices
March 16, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss the weather, precision ag, crop protection company mergers, and commodity prices in this Read More
Soybean Field
Seed/BiotechBayer Invests $8.1 million In Soybean Advancement In Th…
March 16, 2017
Growers in Illinois and across the Midwest now have the added benefit of a state-of-the-art soybean research facility, increasing accessibility Read More
CHS
CropLife 100CHS Acquires Western Co-op Transport Association
March 16, 2017
CHS Inc., North America’s leading farmer-owned cooperative and a global energy, grains and foods company, has purchased Western Co-op Transport Read More
Young corn plants in soil
HerbicidesBest Management Practices To Control PPO-Resistant Weed…
March 14, 2017
Weeds resistant to the class of herbicides called protoporphyrinogen oxidase (PPO) inhibitors are spreading at a faster rate than weed Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Eric SfiligojFungicide Resistance On The Horizon
March 13, 2017
For many years now, the agricultural market has struggled to keep ahead of an ever-growing number of herbicide-resistant weeds. According Read More
Management2017 Commodity Classic Review
March 10, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss what happened at the recent Commodity Classic in San Antonio. Read More
Farmer using AgriSync
ManagementMajor AgriSync Update Aims To Extend Ag Experts’ Power …
March 10, 2017
AgriSync announced a major update to its leading collaboration and service management tool for professional ag advisors and their farmer Read More
Agrible Pocket Spray Smart App
EquipmentNew Agrible Pocket Spray Smart App Alleviates Spraying …
March 10, 2017
There’s a new app to help farmers decide when to spray their fields. Pocket Spray Smart is a free iOS Read More
BPIA logo
Crop InputsBiological Products Trade Association Changes Name, Exp…
March 9, 2017
The Biological Products Industry Alliance (BPIA), formerly the BioPesticide Industry Alliance, is the new name of the rapidly growing U.S.-based Read More
BBI MagnaSpread Salford BBI
Equipment14 Fertilizer Spreaders For 2017
March 9, 2017
Application equipment manufacturers stressed flexibility and accuracy with this year’s crop of fertilizer spreaders. From AGCO’s TerraGator TG9300B and Case IH’s 810 Read More