Fertilizer market: Lopsided outlook most likely

What’s the outlook for fertilizer supplies and prices this spring? It looks as though prices will be firm and supplies snug.

And if fertilizer demand is greater than expected (unexpectedly strong corn acreage, say), then fertilizer supplies most likely will tighten and prices rise quickly.

On the other hand, a substantial “falling-out-of-bed” of commodity markets generally, and of grain markets in particular, between now and spring likely would lead to good supply availability but only modest downside pressure on prices. That is the outlook in a nutshell -- mostly upside for prices, with very limited downside pressure.

Why is the outlook so lopsided? There are a couple of carryover factors that play significant roles in the outlook for spring.

The first carryover factor is the caution instilled in the supply chain from the fertilizer price implosion of late 2008/early 2009. That whole episode made many in the industry very cautious this year.

Erring on the side of having minimal after-spring inventory probably is a natural reaction following last year. Moreover, the window to secure more supply for spring is quickly closing.

The second carryover factor is the lack of fall application. Ammonia application in Illinois was a “bust” last fall, about 50 percent of expected application.

With ammonia storage limited, and a long, slow supply chain, the ability to make up this deficit in the spring is extremely limited. Fall dry application was very light, too.

If spring “opens up” early, say March, and ammonia is the desired N product (the discount for ammonia to UAN solution may promote ammonia, too), we could quickly drain traditional, “close in,” storage terminals, and be looking for ammonia supply from terminals farther away. This scenario would mean delays and strong prices.

If, on the other hand, the spring application window is short and UAN solution is more preferred, then making up the fall N deficit will be very hard because the marketplace is not set up, I do not believe, to store or ship this much UAN solution.

For dry product, phosphate prices are strong because worldwide restocking is taking place. That has driven a 50 percent increase in world prices in the past three months.

Potash prices finally seemed to have bottomed globally, and they look to be well supported by good global demand, too.

How do you handle all the craziness around price and supply? Your local FS retailer can help you plan in this uncertain environment.
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Joe Dillier is GROWMARK’S director of plant food. His e-mail address is jdillier@growmark.com.