Fall Fertilizer Outlook: Leading Ag Retailers ‘Expect Demand to Rebound’
September 18, 2023 Admittedly, finding a consensus opinion on most things in the agricultural world is inherently difficult. In fact, in the normal course of events each growing season, observers can find an equal number of optimists and pessimists no matter what topic/product category is being asked about.
This certainly was the case earlier this year as CropLife® magazine surveyed the nation’s top ag retailers on their outlook for the spring fertilizer application season. In all, the “read” on the market at that time was 50/50. Given these results — and past historical trends — readers would be forgiven for expecting anything but a similar view of the fertilizer outlook now that the 2023 fall application season has rolled around.
They would be wrong in this case, however. According to all of the ag retailers CropLife magazine communicated with for this article, the 2023 fall fertilizer season looks to be very positive indeed.
“Our outlook for fall fertility 2023 is positive,” says Lance Ruppert, Executive Director of Agronomy Marketing & Technology for GROWMARK, Bloomington, IL. “Price outlooks suggest a reversion to more historical levels. After two years of the market cheating rates, we expect demand to rebound.”
David DeLong, President at The DeLong Co., Clinton, WI, agrees with Ruppert’s fall fertilizer application assessment. “We are positive at this time,” says DeLong. “Crops will be less than last year but still respectable. Crop prices are good for both new crop 2023 and 2024. Input costs are lower than last spring and fall.”
Speaking of prices, these are the key for ag retailers to see strong demand for fertilizer going into the fall season, say market watchers. In fact, according to Jay Boomsma, Vice President, Chemical/Fertilizer Division at Agri Partners, Clear Lake, SD, overall fertilizer prices falling back to “semi-normal” levels from the 2022-2023 fall/spring season, coupled with grain prices that have stayed more robust, is the major reason he believes this fall’s application outlook appears so bright.
“We are positive with what the fertilizer prices have come down,” says Boomsma. “The grain market price is still high enough to make it very profitable for the farmer. It’s one of best fertilizer-to-corn price ratios we have had!”
The Macronutrients Outlook
Not too long ago, exceptionally high fertilizer prices were causing plenty of worry among ag retailers. The fear was that grower-customers would be severely cutting down on their macronutrient applications — particularly phosphorus and potash. Indeed, most crop nutrients were selling for near to $1,000 per ton, with some forms of nitrogen easily cracking the $1,500 per ton barrier. However, based upon the feedback from ag retailers CropLife spoke with, these higher prices were somewhat offset by higher grain prices/yields, so the expected pullback in application rates didn’t occur.
So, with market conditions stabilizing in recent months, what can ag retailers expect in the way of performance for the industry’s three macronutrients — nitrogen, phosphorus, and potash? Here, the outlook appears more varied than that for the overall marketplace.
According to Boomsma, grower-customers in his part of the country are projected to pull back on their nitrogen usage while increasing their applications of phosphorus and potash. “Nitrogen will perform the worst, as UAN price is very competitive to urea and this has not been (the case) in past years,” he says. “Phosphorus and potassium will perform the best. Prices have declined and farmers have not been applying enough for cost per acre.”
Ironically, in his market, DeLong sees just the opposite happening when it comes to nitrogen / phosphorus / potash applications. “If weather allows, it will be a great anhydrous ammonia fall due to lower costs,” he says. “Phosphorus may struggle due to relatively higher cost compared to reduction of potash prices over the last year.”
In the heartland states, GROWMARK’s Ruppert believes potash will have healthy fall application as prices for it have dropped back to some form of normalcy. “Those values look compelling for folks that may have just applied maintenance rates the past two years,” he says.
Elsewhere, Ruppert thinks a steadier range of prices among nitrogen fertilizers could cause some shifts in usage types. “If the nitrogen product spreads reflect more historical expectations, I could see a return to split shot programs, using more than one form per application,” he says.
The Early Outlook for 2024
Looking further down the road beyond fall 2023, Ruppert thinks one potential “black swan” event that could negatively impact fertilizer applications ties back to the European Union and its weather patterns. “European natural gas is still a big wildcard,” he says. “The mild winter last year eased the concerns on natural gas in Europe, but a cold winter this year could still be a risk.”
Speaking of Europe, DeLong thinks that a potential “white swan” event for the fertilizer market would be an end to the year-long war between Russia and the Ukraine. “A positive effect would be if the Russia/Ukraine conflict gets resolved soon,” he says. “That way, port repairs in Ukraine can get an early start.”
No matter what other factors might come into play with crop nutrients for 2023-24, George Secor, President/CEO at Sunrise Cooperative, Fremont, OH, thinks the prices that growers get/pay for products and services will remain the key to any up-or-down fertilizer application market swings.
“Prices are much lower, and the risk of devaluation will help many sleep much better,” says Secor. “The downfall is that interest rates have really surged. We need to make sure we are capturing interest cost or requiring a prepay to make sure we do not erode margins due to higher interest rates eating us up.”
However, based upon one of Sunrise’s predictive programs, the outlook for crop nutrients the rest of 2023 and on into 2024 looks positive for now. “Our Fertilizer Grain Program looks at fertilizer values and compares those values to December 2024 grain values,” says Secor. “This ratio has been well below the five-year average for some time now and has even flirted with the five-year low ratio on certain products. Ratios this low give our customers the confidence to get in gear and commit to buying 2024 fertilizer and selling December 2024 grain. I am very thankful we have been able to put our customers in a strong position for the 2024 crop.”
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