There seems to be some discrepancy between what some call soaring fertilizer prices and others see as moderately higher fertilizer prices. But there also seems to be confusion about using the word fertilizer when prices of the big three fertilizer components—nitrogen, phosphorous and potassium—should be tracked separately.
A recent posting on the “Potash Blog” by Robin Bromby points to nitrogen prices being substantially higher in the U.S. “The average U.S. farm price of fertilizers has soared in the past 12 months and in some cases has exceeded the price spike recorded in 2008, according the latest monthly World Agronomy report out of ABN Amro and Virtual Metals. Quoting the U.S. Department of Agriculture, the report said a short ton of anhydrous ammonia, one of the key fertilizer benchmarks, averaged US$749 in March compared with US$499/ST in March 2010 and US$755/ST in April 2008.”
Bromby also wrote that urea and sulphate of ammonium, both N sources, also jumped fairly drastically in the last 12 months.
Demand for N to grow this year’s crop is far from over and there have been floods, tornadoes and transport interruptions in supply. A lot of N will go on in season even to fields where N was applied last fall; heavy rains washed a percentage of that N out of the soil in many areas.
On the side of the P and K fertilizers, a PotashCorp of Saskatchewan official the first week of June said prices are not shooting through the roof. “There is not a rapid ramp up in fertilizer prices, like the spike that we saw in 2008. What you are seeing is more moderated prices. The price increase in fertilizer has not matched the increase in agricultural commodity prices so it is leaving the farmer in a very healthy position,” said Wayne Brownlee, chief financial officer with PotashCorp.
As agricultural production goes forward into 2012 and beyond, it is not likely that fertilizer prices will back off drastically because worldwide manufacture of crop nutrients will basically only meet demand, not exceed it.
Brownlee was reported by Canadian Press as saying, “We think worldwide operational capacity (for potash) is up to 60 million to 61 million tons, and we think we are going to see sales levels return close to that. The market is very healthy. I would say that probably every producer has been able to sell everything they could produce for the first six months of this year, and I think you are going to see the same thing through the rest of the year. As we all know, things can happen, but as of right now the outlook is exceptionally good.”
Bromby reports that fertilizer prices are outpacing farmer income from their crops already and will limit farmer income as the industry moves forward. His data comes from the World Agronomy report. “USDA data shows that price inflation for fertilizers has far outstripped the rate of income increases U.S. farmers have experienced over the past two decades. Using 1992 prices as a base of 100, an index of fertilizers soared to 252 last year, while crop income rose to just 156. In the process, fertilizer has changed its relative importance as an input from being a large annual cost to the largest single input cost a farmer pays.”