Past years' drops in fertilizer demand are leading more dealers to be cautious on what they hold in their warehouses. The consequence: higher fertilizer prices and lower inventory, predicts agronomist.
Growers can figure to pay more for fertilizer but will probably find supply to be tight. That’s according to Donald Horneck, Extension agronomist at Oregon State University.
Local suppliers may be suffering from a bit of a fear factor after 2008-09 fertilizer prices shot through the roof – only to come crashing down when a recession hit, points out Horneck.
“Dealers got caught with fertilizer ... All the warehouses were full and there were no buyers on the market. Many dealers lost millions of dollars; some nearly went under,” he says.
The dealers who managed to survive were those who wrote off their losses early and restocked with market-valued fertilizers.
Prices in 2011, particularly for phosphorus, had pushed back up. Fertilizer such as 11-52-0 was nearly $880/ton depending on the market, and nitrogen prices were increasing, too.
“All prices are high and everyone is wondering what spring is going to look like. Dealers are a lot less likely to fill their barns with high-priced fertilizer unless they have some reasonable assurance that it’s still going to have value at the end of the day.”
It may not be so bad if the world situation were stable, he says, but it’s “teetering on another recession with PIIGS (Portugal, Italy, Ireland, Greece and Spain) and the precarious position of the EU (European Union).”
The demand for potassium and UAN solution is firm and growers are buying both, Horneck says. “They’re not necessarily buying some of the other products, particularly something like phosphorus.”
India just bought a large supply of phosphorus at $550/ton, so that “kind of sets the bottom of the market,” he adds.
So how much higher will prices go?
“Predicting fertilizer prices is like me predicting your (investment) portfolio tomorrow. Pressures that are changing the value of your portfolio, changing the prices of corn and wheat, are the same pressures that are influencing the fertilizer market.”
Food prices, he adds, have fluctuated wildly and that changes demand.
Frankly, Horneck concludes, fertilizer prices are less likely to go down if corn and wheat prices stay high.