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Big corn crop could pressure spring fertilizer supply

If U.S. farmers boost corn plantings this spring as expected it could pressure spring fertilizer supplies and prices.
Dan Grant 
Published: Feb 15, 2012
Farmers, therefore, should consider locking in some of their fertilizer needs as soon as they determine their spring planting mix, according to Joe Dillier, director of plant food for GROWMARK.

“We have the potential for a tremendous call on supplies this spring,” Dillier told FarmWeek. “If that’s the case, we could have (supply) tightness.

“If you know what you’re going to plant,” he continued. “I’d be getting the fertilizer lined up.”

Farmers last fall applied historically-high levels of anhydrous ammonia, phosphorus (P), and potassium (K).

But it likely won’t be enough to offset fertilizer demand this spring, particularly if the spring weather is conducive to planting corn.

“We had a very strong fall on P and K and anhydrous,” Dillier said. “But we had a similar big fall in 2010 (with record fertilizer applications at some locations) and we still needed all the supply we could get in the spring of 2011.”

Fertilizer prices -- which earlier this month in the state hovered between $800 to $855 per ton for anhydrous, $620 to $700 for diammonium phosphate, $508 to $580 for urea, and $580 to $670 for potash, according to the Illinois Department of Agriculture -- have come down from peak prices last fall.

But farmers, retailers, and wholesalers have held off from making purchases so far this winter in what could amount to a game of chicken as farmers wait for price breaks and retailers wait for orders before locking in fertilizer supplies.

“A big factor in the market is a lack of buying activity,” Dillier said. “The danger is, because of a lack of buying activity, there’s a possibility (the industry) hasn’t positioned enough fertilizer for the spring.”

Prices possibly could continue to trend down but they just as easily could jump $100 per ton this spring, Dillier noted.

“There is so much uncertainty and volatility out there you almost question whether it’s a replay of 2008,” he said. “Everybody in the supply chain is having a hard time getting a bead on what final demand is going to be.”

So why don’t retailers simply stock up on fertilizer in case there is strong demand this spring?

There is no futures market in the fertilizer industry to offset risk so the only way retailers can cover buying risk to to lock in farmer sales.

That’s why a wait-and-see attitude by farmers could be a big gamble this spring.

“If a wait-and-see approach is your Plan A (to determine fertilizer purchases) then by the time you see what happens Plan B probably won’t be available,” Dillier added.


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