Here’s Why Sticker Shock Could Last Through Spring
As farmers spring into planting preparation, work is already underway. And one of the biggest changes this year isn’t just with commodity prices. Farmers are also facing sticker shock on fertilizer. According to Rabobank’s latest RaboResearch North America Agribusiness Review, phosphates prices are now at the highest levels in North America since 2012.
“The big one that took a huge jump is the phosphate market,” says Ken Ferrie, Farm Journal Field Agronomist and owner of Crop-Tech Consulting, Heyworth, Ill. “From last August to where we are today, it’s almost doubled in a per-ton price.”
Josh Linville is director of fertilizer for StoneX Group. He says there are a few factors supporting the price spike, and it all started last summer.
“We weren’t talking about where we were going to spend money on inputs; we were talking about how do I cash flow my farm during the 2021 growing season? It was that poor,” says Linville. “But then all of a sudden, it was the biggest 180 I have ever seen in terms of commodity prices and outlooks.”
Linville says demand for items like fertilizer quickly climbed. It happened at a time when political issues also strained supplies.
“For the U.S. sector, it started back in late June and early July when Mosaic announced this countervailing duty case against Morocco, Russia,” he says. “Those were our two biggest importers. And all of a sudden, they had to shut down imports because they didn’t want to have to risk paying this duty rate.”
Linville says it’s not just the tariffs, but also China – the largest producer in the world – also seeing energy issues and slowing production. That’s all causing fertilizer issues into spring 2021.
“We’re facing a shortage at current prices,” says Linville, “But that’s capitalism. We will always find supply at a certain price and timeframe. Therein lies the problem. The prices rallied in an attempt to destroy some of that demand to try and push some of that off. So, if demand were to stay where it is or increase, we could see shortages.”
Ferrie says the silver lining in the 2021 fertilizer frenzy may be how much fertilizer was already applied in 2020.
“For a lot of the ‘I states,’ a lot of areas had a tremendous, long fall,” says Ferrie. “So, in some cases, 70% to 80% of our potash and our phosphate is already on. And a large portion in the areas where we do fall anhydrous, a large portion of the nitrogen has been on because it’s been such an open winter.”
He says while that may help ease some of the fertilizer demand pressure short-term, there’s another issue sprouting. With so many farmers prepaying for fertilizer, it’s also causing a strain on available supplies.
“A lot of retailers did sell out of their existing inventory,” says Ferrie. “That leaves the unprepared inventory kind of in limbo as far as what the spring price will be.”
As farmers continue to work through a plan for spring, Linville worries the fertilizer price pain could last for several more months.
“Unfortunately, I am struggling to see where prices will correct during the spring season,” he says.
Linville is concerned 2021 may create issues for farmers needing fertilizer, that the issue of sourcing fertilizer is real. And he warns famers to not wait if fertilizer is still a need on their farm.
“A lot of stuff is tight, and this is one of those subjects that we have cried wolf about before. I’m afraid this is kind of that perfect series of events all coming together where if they’ve heard it cried enough times, they’re not going to listen,” says Linville. “And this could be the one that plays out.”
