Price Risk For Fertilizer Shifting To Farmers?

The recent volatility in fertilizer prices has many Midwestern farmers delaying their fertilizer purchases, which could have repercussions that beyond spring planting.

Fertilizer prices jumped last fall on global demand and expectations for a large increase in corn plantings in the U.S. But the reluctance of farmers to buy early this year has pushed sales of key products to their lowest levels in 4 years.

Potash Corp. says reduced demand has knocked down nitrogen sales volumes by 15% in the last quarter, and low demand of potash also pushed the company to slow production in Canada. Mosaic Co. said in January it would cut potash production 20% over the following 4 months due to oversupply.

Some farmers are upset that prices spiked even as corn prices began to drop. As net farm income jumped to more than $100 billion last year, some responded by building their own storage facilities; others hope there’s enough fertility left over from previous applications to supply crops this year.

A recent Rabobank research report says the latest up-cycle in fertilizer prices hasn’t caused the panic-buying or high levels of overpriced inventory seen in 2007-08 because decision makers in the supply chain have assumed new roles and responsibilities. Among other things, inventory management and price risk are shifting toward farmers.

“More transparency for all participants in the supply chain is needed as these market dynamics continue to evolve,” Rabobank says. “Farmers or smallholder merchandise retailers must revise their price risk-management strategies and inventory-control measures.”

In other

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