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Fertilizer prices remain volatile around world

Fertilizer prices are undergoing great price volatility, leading producers, farmers, dealers and farm managers to grasp at a better understanding of the market fundamentals for the invaluable inputs.

“About three million tons of fertilizer move through the retail sector through 40 to 45 facilities stretching from Omaha to the East Coast,” said Rod Wells, food division plant manager for Growmark Inc., during the Top Farmer Crop Workshop held at Purdue University.

“Volatility is alive and well in the fertilizer sector. Our procurement head defies anyone to find fertilizers more volatile than they have been the last six to eight months,” he said.

The U.S. fertilizer market now depends heavily on export policy and market conditions in big players including China and India, Wells added.

The European debt crisis, fertilizer subsidies overseas, Middle Eastern unrest and Chinese production of nitrogen from coal-fired plants all play into a rapidly responsive worldwide market, he said.

The growth in ammonia products means about a 15-percent increase in production, he noted.

Potential new fertilizer facilities in Egypt and long-term Chinese energy costs will affect the worldwide market, too, he said.

Wells said there is an expectation of excess supply and capacity for nitrogen. A new project in Saudi Arabia could add to this outlook.

China, a major phosphate producer, can affect daily fertilizer prices, and experts are speculating on how much product actually will be exported out of both China and India.

The potash industry offers a provocative look at worldwide dynamics, as producers can exercise tight control of supply and demand, Wells said.

Volatility in the fertilizer market will continue with fertilizer as a seasonal use product. The U.S. could export nitrogen as economists foresee a diversion away from the demand cycle that has encased the market for the last couple years, the manager said.

This could be, in part, because of cheaper natural gas prices and fueled by the possibility of higher Canadian potash production, he said.

“We advocate buying inputs back when selling grain — look at the margin rather than the highs and lows,” he advised. “Based on previous experience, there is no price transparency in fertilizer. We think that over time, as more retailers get into the business, there will be more liquidity available in fertilizer markets.”

One aspect of agriculture that could affect fertilizer prices is the long-term effect of hypoxia in the Great Lakes and the Chesapeake Bay Watershed and restrictions placed on fertilizer use there, he added.