Lower production and higher demand is pushing prices higher
By Diego Flammini
A simple explanation exists as to why farmers are seeing fertilizer prices increasing, says Moe Agostino, chief commodity strategist with Farms.com Risk Management.
“In a nutshell, lower global production and higher demand is pushing prices higher,” he said.
In September 2020, farmers were spending about between $400 and $500 per ton of anhydrous ammonia.
This September, the price was averaging about $746 per ton.
Multiple issues are contributing to both production and demand challenges.
One being Hurricane Ida.
CF Industries closed its Donaldsonville location in Louisiana on Aug. 28 because of Ida’s arrival. The company declared force majeure on Sept. 3 and restarted production on Sept. 9.
Incitec Pivot, another fertilizer manufacturer in Louisiana, also closed its plant on Aug. 28.
Those closures, in addition to ships waiting at sea, furthered these fertilizer challenges, Agostino said.
“Plants are shut down and freight ships can’t get into ports and unloaded,” he said. “All of a sudden you have to add a risk premium and prices explode. They are expected to remain high until the end of the year. I see no reason why these prices are going to come back down, and I think you could see all-time highs by next spring.”
Previous all-time highs occurred between 2008 and 2013, Agostino said.
In September 2008, famers were spending about $1,200 per ton of anhydrous ammonia and about $1,000 per ton in 2013.
China could also be playing a role in fertilizer price increases.
The country accounts for about one third of global phosphate production, and at the end of September announced it is banning phosphate exports until at least June 2022.
Reports indicate China is taking this measure to ensure domestic supplies.
These challenges could have farmers making significant business decisions.
Producers may decide to plant more soybeans to minimize the volume of fertilizer they need to purchase. Or they may invest in on-farm storage, Agostino said.
“I’ve heard lots of farmers suggest they may plant more soybeans if it’s dry next April, he said. “And lately, some suppliers have asked for up-front payment and fertilizer delivery to the farm,” he said. “If these high prices are going to remain elevated for a long time, maybe you’ve got to find out how to store some fertilizer moving forward. If you don’t manage these inputs early, you may end up not making any money whatsoever.”