Wray, Colo. — Even before soil temps cooled to more favorable levels, many farmers were making a mad dash to apply their fall fertilizer this year.
It’s been a hot summer, but the fertilizer market is even hotter, and that has farmers worried about whether they will be able to get what they need at a price they can afford.
“There’s a lot of fear out there,” said Tim Ridnour, agronomy division manager for Stratton Equity Cooperative, which operates five locations in central and northeastern Colorado. “We’ve been urging farmers to communicate their needs to us earlier and earlier. It isn’t a two or three month deal anymore; it’s a year to 18 months. You better stay on top of it or you might not get it.”
According to the Economic Research Service of the U.S. Department of Agriculture, fertilizer prices in 2011 are expected to exceed the previous year by 24 percent.
Back in May, the price of phosphate was 31 percent higher compared with the same quarter the previous year, and the price of potash was 20 percent higher.
Typically fertilizer prices move higher from August to December, which explains why stocks in big fertilizer manufacturers tend to gain 15 percent, on average, during that period. Stock prices at the largest North American maker of nitrogen and phosphate, CF Industries, shot up 33 percent in the month of August alone.
Bob Taylor, an ag economist at Auburn University, said there’s an increasing lack of market competition in the fertilizer segment, due to mergers, allowing fertilizer companies to expand their profit margins.
In 2008, after being stable for decades, potash prices tripled in a matter of months, peaking at close to $1,000 per ton. They came down when the recession hit, but are now back to more than $500 a ton and climbing.
Also of concern, the U.S. is increasingly reliant on foreign suppliers, heightening the risk of hostile governments and political instability. Roughly 60 percent of nitrogen is imported from outside the U.S., along with 87 percent of potash, Taylor said. Meanwhile, the U.S. exports about 35 percent of the phosphorous it produces annually, but that’s a problem too, especially since China is holding on to its own in the interests of food security. “The U.S. supply of phosphate rock will be gone in 25 years,” Taylor predicts.
At one time, the price of nitrogen fertilizer was tied to its main feedstock, natural gas. Now Taylor said it is hitched to commodity prices instead, which are at elevated levels.
“In agriculture, we have a saying that has become very true when it comes to fertilizer: whatever the market will bear,” added Ray Ward, who runs a soil testing and consulting business in Kearney, Neb.
High prices spur more agricultural production worldwide and that creates competition for inputs.
“It’s a supply issue, it truly is, especially on the phosphate side of the business,” said Ridnour at his office in Stratton. “We in the U.S. think we’re the kings of agriculture, but we’re third or fourth in the food chain to get products a lot of times. India and China are double our use, and Brazil is coming on more and more.”
Jim Smith, Stratton Equity field representative based in Idalia, said seasonal trends are more pronounced this year, and farmers are scrambling to apply fertilizer earlier than they normally would, even if conditions are less than ideal.
The shortage is so bad the co-op can only provide fertilizer to existing customers. All of the fall fertilizer they contracted was spoken for in just two days. And the problem extends nationally.
“You can only do what you can do,” said Smith, who notes the co-op is adding additional storage for both dry and liquid fertilizers.
Further south in the Arkansas Valley, Albert Melgosa, general manager of Rocky Ford Growers Co-op Association, said farmers had been coming in to prepay for fertilizer, hoping to beat an upward trend in prices. But he was less concerned about supply, since dry conditions throughout the area will prevent some farmers from fall planting or from investing as heavily in nutrient applications.
“I believe there will be plenty of supply, especially with the drought going on in Texas and Oklahoma,” he said. “That’s what my suppliers are telling me right now, but that could change.”
Gregg Stults, who hosted a no-till and cover crops field day recently at his farm south of Wray, said there have been years he would have been ahead to pre-purchase his fertilizer but he prefers not to try to outguess the market. He said he wouldn’t modify his agronomic program just to get fertilizer applied early.
“It is what it is,” he said of the price. “The key factor to me is yield.”
Gary Maskus, a farmer from Arriba who spoke at the field day, said the price of fertilizer was definitely on his radar screen.
“I’m concerned, because as no-till farmers who continuous crop, we’re using more fertilizer than we used to,” Maskus said. “We’re cropping a lot more intensively than the farmers around us. But absolutely that’s a good reason to no-till: 1 percent of organic matter is equivalent to 30 pounds of nitrogen. We try to keep our levels at 2 percent, so that’s 60 pounds of free nitrogen.”
Cover cropping by planting legumes and minimizing tillage are ways to conserve moisture, enrich the soil and potentially reduce fertilizer use, which is attractive to farmers.
Fertilizer typically accounts for about a third of total crop production costs, according to farm economists.
But Ward, a no-till advocate, said the point of improved resource management is not to minimize fertilizer applications, a goal he doesn’t encourage. “We can’t reduce the fertilizer rate much because we are taking it off when we harvest the crop,” Ward said. “The concept is that we need to replace that, or at least a portion of it, every year.”
Likewise, Smith said the farmers he serves are happy to be on his customer list, insuring they will get their fertilizer, and they are more than willing to pay the going rate. At current prices (corn is up 84 percent from a year ago, wheat, 55 percent, and sugar, 62 percent, according to the World Bank) farm fertilizer is actually a relative bargain, he added.
“If we use today’s figures, farmers would be spending less than 29 percent of their total dollars earned on crop inputs,” he said. “In 1968, when I started out in the fertilizer business, that figure was 44 percent.”
It’s been a hot summer, but the fertilizer market is even hotter, and that has farmers worried about whether they will be able to get what they need at a price they can afford.
“There’s a lot of fear out there,” said Tim Ridnour, agronomy division manager for Stratton Equity Cooperative, which operates five locations in central and northeastern Colorado. “We’ve been urging farmers to communicate their needs to us earlier and earlier. It isn’t a two or three month deal anymore; it’s a year to 18 months. You better stay on top of it or you might not get it.”
According to the Economic Research Service of the U.S. Department of Agriculture, fertilizer prices in 2011 are expected to exceed the previous year by 24 percent.
Back in May, the price of phosphate was 31 percent higher compared with the same quarter the previous year, and the price of potash was 20 percent higher.
Typically fertilizer prices move higher from August to December, which explains why stocks in big fertilizer manufacturers tend to gain 15 percent, on average, during that period. Stock prices at the largest North American maker of nitrogen and phosphate, CF Industries, shot up 33 percent in the month of August alone.
Bob Taylor, an ag economist at Auburn University, said there’s an increasing lack of market competition in the fertilizer segment, due to mergers, allowing fertilizer companies to expand their profit margins.
In 2008, after being stable for decades, potash prices tripled in a matter of months, peaking at close to $1,000 per ton. They came down when the recession hit, but are now back to more than $500 a ton and climbing.
Also of concern, the U.S. is increasingly reliant on foreign suppliers, heightening the risk of hostile governments and political instability. Roughly 60 percent of nitrogen is imported from outside the U.S., along with 87 percent of potash, Taylor said. Meanwhile, the U.S. exports about 35 percent of the phosphorous it produces annually, but that’s a problem too, especially since China is holding on to its own in the interests of food security. “The U.S. supply of phosphate rock will be gone in 25 years,” Taylor predicts.
At one time, the price of nitrogen fertilizer was tied to its main feedstock, natural gas. Now Taylor said it is hitched to commodity prices instead, which are at elevated levels.
“In agriculture, we have a saying that has become very true when it comes to fertilizer: whatever the market will bear,” added Ray Ward, who runs a soil testing and consulting business in Kearney, Neb.
High prices spur more agricultural production worldwide and that creates competition for inputs.
“It’s a supply issue, it truly is, especially on the phosphate side of the business,” said Ridnour at his office in Stratton. “We in the U.S. think we’re the kings of agriculture, but we’re third or fourth in the food chain to get products a lot of times. India and China are double our use, and Brazil is coming on more and more.”
Jim Smith, Stratton Equity field representative based in Idalia, said seasonal trends are more pronounced this year, and farmers are scrambling to apply fertilizer earlier than they normally would, even if conditions are less than ideal.
The shortage is so bad the co-op can only provide fertilizer to existing customers. All of the fall fertilizer they contracted was spoken for in just two days. And the problem extends nationally.
“You can only do what you can do,” said Smith, who notes the co-op is adding additional storage for both dry and liquid fertilizers.
Further south in the Arkansas Valley, Albert Melgosa, general manager of Rocky Ford Growers Co-op Association, said farmers had been coming in to prepay for fertilizer, hoping to beat an upward trend in prices. But he was less concerned about supply, since dry conditions throughout the area will prevent some farmers from fall planting or from investing as heavily in nutrient applications.
“I believe there will be plenty of supply, especially with the drought going on in Texas and Oklahoma,” he said. “That’s what my suppliers are telling me right now, but that could change.”
Gregg Stults, who hosted a no-till and cover crops field day recently at his farm south of Wray, said there have been years he would have been ahead to pre-purchase his fertilizer but he prefers not to try to outguess the market. He said he wouldn’t modify his agronomic program just to get fertilizer applied early.
“It is what it is,” he said of the price. “The key factor to me is yield.”
Gary Maskus, a farmer from Arriba who spoke at the field day, said the price of fertilizer was definitely on his radar screen.
“I’m concerned, because as no-till farmers who continuous crop, we’re using more fertilizer than we used to,” Maskus said. “We’re cropping a lot more intensively than the farmers around us. But absolutely that’s a good reason to no-till: 1 percent of organic matter is equivalent to 30 pounds of nitrogen. We try to keep our levels at 2 percent, so that’s 60 pounds of free nitrogen.”
Cover cropping by planting legumes and minimizing tillage are ways to conserve moisture, enrich the soil and potentially reduce fertilizer use, which is attractive to farmers.
Fertilizer typically accounts for about a third of total crop production costs, according to farm economists.
But Ward, a no-till advocate, said the point of improved resource management is not to minimize fertilizer applications, a goal he doesn’t encourage. “We can’t reduce the fertilizer rate much because we are taking it off when we harvest the crop,” Ward said. “The concept is that we need to replace that, or at least a portion of it, every year.”
Likewise, Smith said the farmers he serves are happy to be on his customer list, insuring they will get their fertilizer, and they are more than willing to pay the going rate. At current prices (corn is up 84 percent from a year ago, wheat, 55 percent, and sugar, 62 percent, according to the World Bank) farm fertilizer is actually a relative bargain, he added.
“If we use today’s figures, farmers would be spending less than 29 percent of their total dollars earned on crop inputs,” he said. “In 1968, when I started out in the fertilizer business, that figure was 44 percent.”
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