Heading for a (Good) Fall in Crop Fertility
September 7, 2020 
Despite myriad issues across the world right now, ag retailers anticipate strong demand for fertilizer during the autumn application season.
As growing seasons go, 2020 will definitely be one for the history books. For the first time in more than a century, the nation’s ag retailers and their grower-customers were facing a global pandemic taking place as seeds were being planted in the spring. By all accounts, it was as different and unique a growing season as U.S. agriculture has ever witnessed.
In many ways, it’s somewhat amazing how quickly fertilizer marketplace concerns have shifted across the country. During CropLife® magazine’s fall fertility outlook presented in our September 2019 edition, many of the industry’s key issues for the fall crop nutrient application season centered largely on two topics — uneven weather patterns disrupting field work in many parts of the U.S. and the ongoing trade dispute between this country and China, one of its major agricultural trading partners. As Dave Coppess, Executive Vice President, Sales and Marketing for Heartland Co-op, West Des Moines, IA, told CropLife one year ago: “Many of the crops were planted two to three weeks behind normal. Barring an early frost, harvest will also be delayed. Weather, as always, will be the greatest obstacle to really ‘sticking’ a big fall!”
By all accounts, 2019 fall application ended up performing just fine. “Our fall application season was good,” Tim McArdle, Vice President for BRANDT, Springfield, IL, told CropLife during our spring fertility feature in February. “This could [have been] driven by strong corn acres, a possible resolution of trade between the U.S. and other countries, and good fertilizer prices.”
Of course, some ag retailers cautioned that this strong fertilizer demand in fall 2019 would dampen demand during the upcoming 2020 spring season. “In our marketing territory, we had a very strong fall fertilizer season,” Fred Morscheck, General Manager, Operations for The McGregor Co., Colfax, WA, told CropLife this past spring. “This may lead to lower topdress acres this spring.”
Then of course, COVID-19 reared its ugly head, quickly spawning a pandemic that infected millions worldwide and killed several hundred thousand in the U.S. Now more than a half-year into the market disruptions caused by COVID-19, many agricultural market observers are probably wondering how the 2020 fall fertilizer application season will play out?
An Expected Strong Fall
In a few words, quite well. According to Kevin Semmens, Director of Finance, Planning, & Analysis for Nutrien Ag Solutions, Loveland, CO, the nation’s growers planted an estimated 90 million acres of usually fertilizer-intensive corn this past spring. Better still, in many portions of the Corn Belt, the weather cooperated to keep the growing season on schedule (vs. what happened to the market during both 2018 and 2019).
“With both a very large crop from a production standpoint and a crop that is advancing rapidly from a maturity standpoint, I feel that the fall could be very strong,” says Semmens. “Pricing is very attractive to growers and removal of phosphate and potash look to be very large.”
BRANDT’s McArdle agrees with this assessment. “We are on track to have a good crop in central Illinois,” he says. “Our good farmers know the value of replacing fertilizer removal, which should result in good phosphate and potash sales.”
Another ag retail representative that foresees a positive fall fertilizer application season is Phil Altstaetter, head of Crop Nutrients at Sunrise Cooperative, Fremont, OH. “I think the initial response, or gut feeling from folks, is with the local cash price of corn trading below $3 at harvest, it cannot be considered good news for fertility applications,” says Altstaetter. “I would absolutely agree that farmer profitability cannot be ignored and must enter into the equation. [But] at the same time, we need to sit back and consider that we are looking at nitrogen, phosphate, and potash prices that have come down tremendously in value as well. When we consider the fertilizer-grain price-index ratio, some of these ratios are as low as they have been in the past five years. With this price ratio very much in line with the past five years of history and, quite frankly, at the bottom of the range, fall application should be okay.
His next reason for optimism for fall fertilizer application ties back to the weather. “The second positive I see is almost everyone I’ve talked to across the U.S. makes a comment like: ‘Yes, we need rain to finish this up and we have a few tough spots here and there, but boy our stands are good. Give us the right water and our crop will be good,’” says Altstaetter. “Regardless of grain prices, a big harvested crop tends to lead to very good fertilizer application. [So] I am expecting a very traditional application season this fall.”
In terms of the various macronutrients and their performances this fall, Nutrien Ag Solutions’ Semmons predicts phosphates and potash will do the best. “If we get a wide open fall, I don’t see a distinction between phosphates and potash,” he says. “At the most risk is anhydrous ammonia (NH3), because of weather.”
BRANDT’s McArdle foresees a similar macronutrient outlook in his company’s territory, pointing to the same wildcard for nitrogen-based products.
“Phosphate and potash prices are predicted to be somewhat lower than in 2019,” he says. “Of the two, we expect better sales of potash. And we are a strong corn acres area, so barring weather problems, we expect good movement of fall ammonia.”
Ditto for Sunrise’s Altstaetter in his market. “Potash will perform the best,” he says. “The price is a cheap as it has been since 2016. Our soils need is fairly desperate, and at the end of the day, potash will win simply due to default for us here at Sunrise.”
Negatives Factors for Fall Growth
Still, Altstaetter warns that there are a few challenges to the agricultural marketplace experiencing a strong 2020 fall fertilizer application season. Perhaps most prominent in his home state of Ohio is the recent emphasis on reducing fertilizer run-off into nearby water sheds (such as Lake Erie). Over the past few years, this has led to plenty of calls in the Buckeye state for ag retailers and their grower-customers to forego fall field work (on potentially frozen ground) in favor of spring applications.
“I have made the case above for a very traditional application season this fall,” he says. “The biggest impediment to growth will probably be the push away from fall and winter application of phosphates here in Ohio. Fall application is just more and more of a struggle every year. I do not see this year being any different. With the focus on water quality and comfort growing around spring and in crop applications, our biggest challenge for fall growth is just the peer pressure to reduce applications in the fall.”
Of course, the “800-pound gorilla in the room” for every business and industry during 2020 is the coronavirus pandemic. For many analysts, this represents a potentially huge unknown all-around. “A second challenge to growth in this COVID-19 environment we are in today,” says Altstaetter. “Simply, how do retailers effectively prospect to grow their business and meet new customers? Right or wrong, much of our sales focus is face-to-face and in-person, and we are transitioning existing business to less face-to-face. But how will be prospect in a non-face-to-face environment to grow more broadly?”
As you might imagine, the threat of catching a highly infectious and potentially deadly disease has caused many in-person events normally held for ag retailers and suppliers to be cancelled. This was the case for the 2020 Southwestern Fertilizer Conference (SWFC), normally held in mid-summer and a key meeting for discussing crop nutrient trends and needs. In past years, missing out on a meeting such as this could have severely hampered an ag retailer’s ability to line up fertilizer supplies to meet fall and spring demand from grower-customers.
But Altstaetter says this is no longer the case for most ag retailers. “Very few if any orders have been placed at summer meetings for quite a while,” he says. “For Sunrise, nothing has changed in how we ordered product. Like many things in our lives and in business, COVID-19 may generate many permanent changes. Though something like SWFC provided a great environment for networking, very little business is actually done at those deals.”
A more pressing concern, he adds, is how the pandemic might alter these kinds of events going forward. “My question would simply be are those kind of conferences going to be changed forever?” asks Altstaetter. “Many businesses have found some great benefits from not having their folks out traveling to these types of events as much. Will these benefits outweigh falling back in to old habits from the past in future years?”
In fact, according to BRANDT’s McArdle, the COVID-19 pandemic and in-person meeting cancellations in 2020 could lead to more remote communications being used by ag retailers, grower-customers, and their suppliers. “Technology has given us multiple ways to communicate with customers and suppliers,” he says. “I believe that if you have an existing, trustful relationship with customers or suppliers, then you can successfully conduct business remotely. I believe retailers will use this as an opportunity to enhance their electronic and technology offerings. [This way, we can] show our customers the power of data in decision-making.”
The Outlook for 2021
Looking ahead to next year, 2021 is shaping up to be one another year of uncertainty for much of the globe. Still, for agriculture, the key to crop nutrient demand will likely boil down to the same factor that usually influences the marketplace — commodities. “The big question going into 2021 is centered around commodity pricing and what will acreage be for the major crops,” says Nutrien Ag Solutions’ Semmens. “Also with so little appreciation occurring, will retailers play more of a just-in-time strategy? No one wants to be left with inventory with so many market dynamics.”
Sunrise’s Altstaetter agrees. “Retailers will not be able to ignore that we are in a period of time in which our world has an excessive amount of commodities,” he says. “We must consider the following: Oil went negative, scrap steel is not worth picking up, ethanol is weak, corn could have a three-billion-bushel carryover, and meat processing plants are way behind on harvesting animals. Fertilizer is no different. The world has a lot of it right now. Yes, there are the traditional logistical concerns we must keep aware of, [but] inventory of product does not seem to be an issue. In an era of large world supplies of commodities, retailers will have to be cautious with how much length they want to take risk on. I understand prices are in the bottom of the range, but ask the guys who had oil go negative on them if they thought that could happen?”
As always, adds Altstaetter, there are also a few wildcards in the deck for ag retailers to consider when it comes to fertilizer application and overall demand when considering the 2021 growing season. “The value of the dollar is something that deserves to have one eye kept on,” he says. “If weakness persists, could that positively impact exports from the U.S.? Could some of our excess grain inventories make it out of the country more easily?”
According to Altstaetter, there are also two other factors to consider. “Fake meat,” he says. “I continue to watch this story unfold. Where does fake meat end up? If it actually starts taking some market share, what happens to corn demand? Then there’s transportation. It seems to me with an economy which is clearly stumbling, maybe a few of the railroads are waking up and realizing they may need something to haul on their rails. Trucks are also plentiful right now, which between the two, should put downward pressure on transportation costs.”
In addition during 2021, perhaps the ultimate wildcard facing the entire agricultural marketplace (and the world) is COVID-19. The pandemic still being an issue early next year already has a few ag retailers wondering about logistics, among other things. “The other thing Sunrise will have to keep in mind, should COVID-19 remain an issue, is what happens if a key terminal we use shows up as a hot spot and we have reconsider how we get product in the right spot at the right time?” says Altstaetter. “How do we broaden our terminals we use to mitigate against some of this risk?”
However, Nutrien Ag Solutions’ Semmens seems more confident that the world will have an answer to the coronavirus problem by next year’s growing season — or at least that ag retailers will be able to handle it. “From the COVID-19 standpoint, will we have a vaccine,” he predicts. “And if not, we can keep our operations running smoothly. We proved in 2020 that we can set standards and protocols that allow us to service our growers.”
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