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
ManagementStudy: Farming Becoming Riskier Under Climate Change
March 28, 2017
Scientists the world over are working to predict how climate change will affect our planet. It is an extremely complex Read More
Young Corn Plants
Crop NutritionProtecting Nitrogen Provides Economic, Environmental RO…
March 28, 2017
Every business looks to improve its return on investment and reduce its risk of loss. Farmers are no different, yet Read More
Water Drainage
Eric SfiligojDMWW Lawsuit Dismissal Good News for Ag
March 27, 2017
On March 17 while most of the nation was toasting St. Patrick’s Day, agriculture was likely lifting a glass (or Read More
Eric Jenks, Wilbur-Ellis
Crop InputsWilbur-Ellis Launches ADVANTIGRO Plant Growth Regulator…
March 27, 2017
Wilbur-Ellis Agribusiness, a recognized leader in the marketing and distribution of crop protection, seed and nutritional products, as well as Read More
Yara West Sacramento Ribbon Cutting
Crop InputsYara West Sacramento Is Newest Addition
March 27, 2017
Yara’s West Sacramento Terminal was officially welcomed March 21 as the newest Yara North America facility in the U.S. While continually Read More
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