Looking at today’s fertilizer category within the CropLife 100, observers might be tempted to call to mind the old saying about political projections in the state of Maine. In other words, as goes the fertilizer category, so goes the CropLife 100.
This has certainly been the case these past few years. In fact, since the 2010s began, the fertilizer category has been on a rapid upward trajectory year-after-year. Once the fertilizer crash of mid-2008 and 2009 passed, grower-customers anxious to boost yields in the $7 per bushel corn era were more than happy to buy large amounts of fertilizer from ag retailers.
For evidence of this trend, you need look no further than the annual CropLife 100 survey numbers themselves. In 2010, CropLife 100 respondents recorded a 10% increase in their fertilizer revenues to $10.1 billion. By 2011, this figure had grown significantly, up 26% to $12.7 billion. In 2012, sales jumped another 20% to $15.2 billion. Not surprisingly, in each of these years, overall CropLife 100 sales increased accordingly. To many in the agricultural community, it seemed as if the good times for fertilizer would never come to an end.
But there were hints that the marketplace was beginning to shift slightly for the category during 2013. According to that year’s CropLife 100 survey, the nation’s top ag retailers saw fertilizer category sales growth of only 0.7%. Most respondents blamed the steadily falling commodity prices, particularly for corn, for depressing their fertilizer revenues during 2013.
So the question remained — would the fertilizer category in 2014 follow 2013’s slowdown or return to its high-flying growth ways of the earlier part of the decade? Unfortunately, the answer was the former. According to the 2014 CropLife 100 survey, the fertilizer category sales dropped 3% during the year to $14.8 billion. Market share for the category still leads the all CropLife 100 crop inputs/services at 49%, but this represents a significant drop from the mid-50% percentages the category held just a few short years ago.
To a company representative, most CropLife 100 retailers said depressed corn prices were to blame for this decline — and would probably continue to be the case going into 2015 as well.
“Farmers in general are probably going to be a little conservative,” said one Midwestern CropLife 100 retailer. “Since they’ve built programs that have gotten the fertility up, they may be able to coast a little bit [and] reduce usage.”
Digging a bit deeper into this trend, this year’s CropLife 100 survey asked respondents to describe how challenging it was for them to sell fertilizer to their grower-customers in 2014 compared with 2013. For nitrogen (N), the percentage was the same both year — 23% of respondents saying the environment was “very challenging” for this fertilizer segment. Another 38% described their N sales as “more challenging than normal,” a bump of 4% from the 2013 percentage.
The differences were more apparent for phosphorus (P) and potassium (K). For P, 14% of CropLife 100 ag retailers described the market for sales as “very challenging,” up 2% from the 2013 figure. Another 41% said their P sales were “more challenging than normal,” up 14% from the prior year’s percentage. For K sales, 24% of respondents said their sales were “very challenging,” a whopping 13% increase from 2013. Thirty-five percent said their K sales during 2014 were “more challenging than normal,” an increase of 4% from 2013.
Less Corn Coming
Unfortunately for the fertilizer category, things aren’t looking particularly bright heading into 2015 either. For the most part, the category has benefitted from the nation’s and world’s strong demand for U.S. corn over the past few years. Coupled with extremely uneven weather events, this has kept corn harvests low enough to significantly boost corn prices into the $7 per bushel range.
During 2014, however, the weather seems to have moderated somewhat and the nation’s corn harvest looks strong enough that commodity prices have steadily fallen throughout the year. Today, they stand in the $3 per bushel range. And to paraphrase what many growers have said during the summer trade show season: “What works for $7 corn in my spending doesn’t work for $3 corn.”
CropLife 100 retailers are already bracing for this new reality. According to the 2014 survey, a whopping 75% of respondents expect the corn acreages for their grower-customers to decline 1% to 10% during 2015. Only 6% say their grower-customers plan to increase their corn acreage during 2015 from 1% to more than 10%.
Instead, it appears that most grower-customers for CropLife 100 retailers will be moving their fields over to soybeans, which have also fallen in commodity prices, but still average more than $11 per bushel (and are less dependent on fertilizer compared with corn, of course). In 2015, 71% of respondents say their grower-customers will boost their soybean crops from 1% to 10%. Only 7% expect soybean acres in their areas to decline.