Decreased demand may cut fertilizer costs

Farmers could see some relief in fertilizer costs this year as world demand has slowed and petroleum prices have retreated from the highs of 2008.
The average price of fertilizers is down about 40 percent from last year, said Mike Mleziva, chief executive officer with AgVentures in Shawano.

"Were coming off all-time highs and the recession … so were kind of getting back to more normal price ranges on fertilizers," he said. "With the high prices, sales were down across the board in our markets in this area, the dairy and crop markets. (Lower prices) will help cash flow situations on our customers farms."

High prices were not only hard on farmers, but farm suppliers like AgVenutres, Mleziva said.

"It will help us if we can help our customers to have better cash flow and remain more profitable," he said. "Where it was before was tough for all levels of ag."

Fertilizer prices topped out between $900 and $1,100 per ton, depending on the product, Mleziva said.

For those such as Glenmore dairy farmer Tom Ronk, some relief in the input column is welcome after poor prices and increased operational costs last year.

"With $15, $16 milk, some people think we can farm just fine, but they need to look what everything costs, and the reality is I dont think it pencils out," he said. "We need more of a year than just break-even… We need to recoup some loss, and everybody is in business to make a little bit of money."

On average, farmers in this part of the United States paid $787 per ton for anhydrous ammonia in March, according to the National Agricultural Statistics Service. That was up from an average of $429 per ton in 2005 and $769 per ton in 2008.

Like fertilizer, feed and seed prices have also been on the increase in recent years. Fuel prices rose the last few years until 2009, according to the report. Through March, the average amount paid per gallon for bulk delivery diesel was $1.69 per gallon, down from $3.61 per gallon the year before.

Increasing input costs eat at the bottom line on farms, especially in years like 2009 which saw dairy prices mired in a year-long depression. Dairy prices are beginning to recover and reach levels that are closer to the cost of production, which is around $16 per hundredweight.

"Compared to last year, fertilizer prices have come back significantly compared to the record highs we were talking about a year ago at this time," said Greg Blonde, ag agent with Waupaca County University of Wisconsin-Extension Service.

While fertilizer costs have retreated, he expects feed prices will stay relatively high this year.

"We have a lot of variables out there — fuel prices are climbing again," Ronk said. "Its going to be a challenging year because of the leftover repairs and other things that werent done last year that should have been done. The way milk futures look right now too, its a crapshoot."

A report from the International Fertilizer Industry Association delivered late last year indicated a turbulent fertilizer market in 2008 stabilized in 2009 with flat demand with global production and sales to "very low levels" because of the amount of carryover product in the distribution system.

"By the end of 2009, global nutrient consumption exceeded overall sales and would have left the supply pipeline rather empty," the report states. "The situation in 2010 would see a reversal trend, compared to 2009, with moderate 4 percent growth in global demand and a strong 7 percent rebound on the total sales of mainstream products."

Last week, Plymouth, Minn.-based fertilizer producer Mosaic Co. said potash and phosphate selling prices were lower and potash sales volumes were 40 percent below a year ago. Phosphate sales volumes were up 90 percent, however.

The phosphate market began to recover during the quarter in Asia and the Americas as distributors purchased fertilizer to meet farmer demand, the company said. Prices also strengthened.

The potash market, which has been soft for most of 2009, is beginning to gain traction with the recent settlement of contracts in China.

"As we come out of this downturn, we are confident in the long-term nutrient demand outlook," Mosaic CEO Jim Prokopanko said in a statement.

Mleziva said the general trend on seed costs has some companies holding steady while others are trending slightly upward for 2010 and some coming down slightly. He anticipates prices for crop protection products will decline as prices have dropped in the Glyphosate market.