Fertilizer Prices Pain Buyers

Fertilizer prices — unlike gasoline prices — aren’t going down, even as manufacturers cut production. What will that mean for your dealership and your grower-customers?

According to an article in the Yankton Daily Press & Dakotan, in the eyes of many growers and agricultural experts, fertilizer prices have seemed to defy the normal laws of economics. Despite high prices, makers of phosphate and potash say there’s an oversupply and earlier this month, Plymouth, MN-based Mosaic Co. said that it would scale back production, the second major company in recent weeks to announce production cuts.

Mosaic, the world’s largest producer of phosphate and potash, said it will cut phosphate production by 500,00 metric tons to 1 million metric tons over the next several months. That’s about 10 percent of the company’s annual production. Potash Corp. of Saskatchewan, another large fertilizer company, in September idled about 30 percent of its production capacity because of a labor strike.

Both companies are dealing with their own financial issues, including share prices that have plummeted 50 percent or more since their peaks in mid-June. Mosaic, which is majority owned by agricultural giant Cargill Inc., closed Oct. 15 at $35.75. The stock traded at more than $160 in June.

As a result of curbed production, it’s not likely that fertilizer prices will decline anytime soon, agricultural analysts say. Mosaic, in fact, said that it expects the average price of phosphate to be around $1,020 to $1,080 a metric ton (about 2,200 pounds) — virtually unchanged from its current level — through the second quarter. Many growers buy their fertilizer in the fall and seed in the spring, which means they won’t be able to avoid the current high prices. (CropLife eNews note: Neither will retailers, who purchase those fertilizer inputs even earlier.)

Growers were told this year that rising fertilizer prices were the result of increased demand for grains, leaving some hopeful that fertilizer prices would fall once commodity prices dropped. But the agricultural commodities bubble has burst in recent weeks — corn closed Oct. 16 down 43 percent from June highs and soybeans fell to an 11-month low — amid an unfolding global economic slowdown; yet fertilizer prices have continued to surge upward.

Some growers have turned their anger toward local grain elevator operators, while others have begun to suspect the fertilizer companies of manipulating prices, said Bob Zelanka, executive director of the Minnesota Grain and Feed Association. “It certainly does have the feel like they’re controlling the supply to drive up price,” he said.

In a federal lawsuit filed last month in Minneapolis, Mosaic and seven other large fertilizer companies were accused of conspiring since 2004 to limit competition and drive up prices of potash, which have more than tripled over the past year. Mosaic has denied the allegations.

James Prokopanko, Mosaic CEO, said his company’s decision to cut production was a reaction to an excess inventory buildup — and was not designed to keep prices high. In the commodity price boom that occurred in the spring and summer, fertilizer distributors stockpiled huge amounts of phosphate, before prices rose even more. Many warehouses that store fertilizer nutrients are now almost full, and would have no place to store any increase in production, Prokopanko said. Once growers work through these excess supplies, Mosaic will increase production again.

An unusually wet spring across much of the nation added to the excess supply. Prokopanko said many growers planted their crops later than usual, and the late harvest has caused them to postpone fertilizer purchases — adding to the stockpiles.

“The whole system is backed up,” Prokopanko said. “We have no place to put this product we’re manufacturing.”

Mosaic is not the only agricultural company facing challenges. Excess supplies, sinking commodities prices, and fears of a widening credit crisis have sent shares of farm-related companies into a tailspin in recent weeks. Shares of Monsanto have fallen from more than $140 a share in June to $81.44 on Oct. 15, a decline of about 40 percent. Grain processors Archer Daniels Midland Co. and Bunge Ltd. have experienced similar declines.

David Swenson, an associate scientist in the Economics Department at Iowa State University, likened the run-up in agricultural stocks in the spring to the technology bubble of 2000 and 2001, when investors suddenly realized that demand would not grow indefinitely.

Leave a Reply

Latest News
Crop InputsArkansas Plant Board Votes to Ban Dicamba — Now W…
June 23, 2017
The Arkansas State Plant Board has voted to pass a proposed emergency rule to ban the use of in-crop dicamba, Read More
Engenia soybeans
Crop InputsBASF: ‘Closely Monitoring’ Dicamba Situatio…
June 22, 2017
BASF, whose Engenia herbicide is the target of more than 200 drift complaints in Arkansas, emailed the following statement to Read More
ManagementConsolidation Update
June 22, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss progress on manufacturer consolidation, and another big move for Midwest cooperative Central Valley Read More
Palmer pigweed seedhead in cotton
Crop InputsThreat of Dicamba Ban Looms in Arkansas
June 22, 2017
The Arkansas State Plant Board has rejected a proposed ban on the use of dicamba herbicide, but a procedural error Read More
Potash Agrium
Crop InputsAgrium-PotashCorp to become Nutrien upon Merger Complet…
June 21, 2017
Potash Corporation of Saskatchewan Inc. and Agrium Inc. have announced today that once the anticipated merger transaction closes, the new Read More
Crop InputsMidwestern BioAg Hosts TerraNu Fertilizer Plant Opening…
June 20, 2017
Last Friday, Midwestern BioAg was joined by over 80 local farmers, media and staff to celebrate the grand opening of Read More
Soybean Field
Industry NewsAligned Ag Distributors Names New President
June 19, 2017
Aligned Ag Distributors LLC announced this morning the appointment of Mary Tolke to the position of President/CEO, effective July 1. Read More
ManagementPlotting Corn, AGCO/Asmark’s Applicator Training Center…
June 15, 2017
Editors Paul Schrimpf and Eric Sfiligoj talk about their recent visits to Columbus, OH, and Bloomington, IL, along with an Read More
Seed/BiotechDow AgroSciences Announces Launch of Enlist Corn for 20…
June 14, 2017
Enlist corn will be commercially available in the U.S. for the 2018 growing season. Dow AgroSciences announced the launch today Read More
ASMARK AGCO Applicator Training Center
EmployeesAsmark, AGCO Open Training Center for Beginning Applica…
June 13, 2017
AGCO Corp. and the Asmark Institute have opened a new Applicator Training Center, created in a collaboration between the two Read More
Power to Do More Contest Winners
HerbicidesDow AgroSciences Announces Three Winners in Power to Do…
June 13, 2017
Thousands of votes have been cast and three farmers have been awarded the power to do more with a $10,000 Read More
Frogeye leaf spot
FungicidesStrobilurin-resistant Frogeye Leaf Spot Threat Looms wi…
June 13, 2017
Heavy spring rainfall throughout the South and Midwest delayed planting and created the perfect environment for diseases like frogeye leaf Read More
PrecisionAg Vision Conference
Precision AgPrecisionAg® Vision Conference: Focused on the Future
June 13, 2017
PrecisionAg® is pleased to announce the return of its PrecisionAg Vision Conference, October 10-12, 2017. Based on overwhelmingly positive response Read More
CHS St. Paul, MN fertilizer terminal
LegislationICGA Praises President Trump’s Remarks on Waterwa…
June 12, 2017
Illinois Corn Growers Association President Justin Durdan, a farmer from Utica, issued the following statement regarding President Donald Trump’s comments Read More
Wheat Growers
UncategorizedWheat Growers Names Tracy Linbo as Senior Vice Presiden…
June 12, 2017
Wheat Growers has hired Tracy Linbo as Senior Vice President of Agronomy. Linbo joins Wheat Growers after having served 10 Read More
EquipmentAgTech Summit Aiming High for Modern Farming Solutions
June 12, 2017
THRIVE AgTech, in partnership with SVG Partners and Forbes, is hosting the third annual Forbes AgTech Summit June 28-29 in Read More
Central Valley Ag Randolph, NE
Precision AgLand O’Lakes Invests in EFC Systems
June 12, 2017
Land O’Lakes, Inc. has made a minority equity investment in EFC Systems, Inc., an ERP (Enterprise Resource Planning) and precision Read More
BRANDT
Crop InputsBRANDT Products Approved for Use with New Cropping Syst…
June 12, 2017
BRANDT, a leading manufacturer of specialty products for the agriculture and turf markets, has announced that 11 BRANDT formulations have Read More