ST. PAUL, Minnesota (DTN) – Many fertilizer dealers are at an impasse. Falling crop nutrient prices along with a prolonged harvest that reduced fall applications to 50 to 60 percent of normal in some areas left them in stock with stocks priced higher than normal. producers are reluctant to remove their hands.
Mark Palmquist, COO of Farming Operations for CHS, described what happened this season as a perfect storm. âWe had a situation where the product was tight and the demand was very high,â he said. Brazil and India would come in and buy products and ships were diverted from the United States
âThe prices were really skyrocketing and, typical in a modern manufacturing business, they met that great demand and those great prices, and then they responded excessively,â Palmquist said. “And so we turned this thing over in no time and now we have a very difficult supply situation,” made worse by the international credit crunch and delayed harvests. âThe supply chain is safeguarded and it crashes. “
This could cause problems for growers who wait until spring to reserve their nutrient requirements. “We have the potential for urea, UAN, phosphates and to some extent potash to have supply issues this spring, depending on how long the grower waits to make a planting decision.” said Tim Chrislip, director of product management and crop nutrient business development for CHS. âAs long as the producer stays away, the dealer stays away. They’ve been hurt so much and they’ve seen that price crash so badly that they’re unwilling to step in front of the producer and bring in the product in anticipation of what the producer might need.
âSo the market is at a standstill and if this continues with urea, for example, until the end of January, then we come to the place where it is too late to line up the cargoes, get the ships, get them here, put them on barges and get them up the river and get the product where you need it, “he said.” It just takes too long. “
MOST IMPORTANT CONCERN PRICE
But for now, the biggest concern for growers seems to be price, not product availability.
This is the first year in 10 that Ridgeville, Indiana farmer Steve Georgi has not purchased any fertilizer for the upcoming growing season.
He applies hog manure to meet the P and K requirements of the soil, and in the past he has made a fall application of anhydrous with N-Serve; however, it has moved away from this practice due to leaching and denitrification issues.
Georgi has ordered all of his seeds for 2009 – he plans to devote 60% of his acres to soybeans and the remaining 40% to corn – and he plans to contract for his fuel needs in January, but is withholding fertilizer indefinitely.
âI think the market can do nothing but improve; my strategy is going to be to do nothing until I have to, âhe said. âMoney will be king – the more you have, the more bargaining power you will have. “
Between his own land and the contract work he does, Georgi operates about 2,300 acres, which he says isn’t that big he can’t be flexible. It will start with an anhydrous preplant application and, if planting is not done by the end of April, make a side application later.
Getting a good price on fertilizer is going to be important this year, he said. âI wouldn’t hesitate to quit my usual suppliers this year if someone later offers something cheaper; not everyone is going to help you â, and producers will have to look for their own offers.
The Imboden are planting 100 percent corn this year on 5,000 of the acres they cultivate near Circleville, Ohio, and no matter what the price of grain or fertilizer, it won’t reduce nitrogen inputs.
âI plan to apply as much nitrogen as we did because you still have to produce the crop – especially for corn, reduce nitrogen and reduce yield,â he said.
What he will do, however, is getting more and more creative. âWe don’t usually use urea, but this year we could,â said Imboden, who is also about to pull the trigger of about 28% liquid nitrogen.
Not all fertilizer going up the river is billed up front, he said, and he plans to buy urea on the barge. “There are some that are there to be negotiated – about a third are not priced yet – and there are some good deals if you can find the right person to talk to.”
If Imboden buys urea from the river, he would have to haul it about 120 miles. âYou wouldn’t want to drive that far for that,â he said. But if you deliver grain to the river because the base levels are a bit better, it works for the return.
It has converted some machine storage areas to temporary storage for about half of its urea needs, and it plans to build more. âWith demand from China and Russia, a big part of the equation (for success) will be if you have the product when you need it,â he said.
LOOK AT NITROGEN OPTIONS
St. James, Minn., Farmer Matthew Wolle began purchasing anhydrous for the 2009 growing season in February. By July, it had acquired 80 percent of its anticipated fall requirements.
“I thought it would be safe (to prepay) because everything said nitrogen prices are going to go up because corn prices are going to go up, so we bought in increments to spread the risk,” he said. he declared.
Wolle planned to sell grain in 2009 and 2010 to make up for these purchases, but âthe grain markets got a little crazy and I resisted a bit. I knew I had to sell that amount to offset the risk, but the emotions got the better of it, so I did a little, but not enough.
Wolle, who farms about 3,000 acres, finished harvesting a week before Thanksgiving, and he’s made about half of his usual fall anhydrous applications. âI was just in the co-op discussing the reservation statement,â he said, âto see if they would charge us to keep those tons of unused nitrogen until spring.â
Although he generally prefers anhydrous because his farm is designed to use it, Wolle said he would also price UAN and urea for spring nitrogen requirements before taking a decision, probably in January or February.
KEEP COMMUNICATION LINES OPEN
Getting our guns around real demand in the spring is something that has to happen, and it comes down to communication, Chrislip said. âAre you really going to reduce the number of applicants? If so, is it 20% or 50%? These kinds of conversations need to take place to ensure that this pipeline continues to have enough product. And I think that would better guarantee the producer a more competitive price, âhe said.
But this is not the first time that producers have faced concerns about product availability. âUnfortunately, we’ve had this problem for several years,â said Bruce Vernon, director of sales and marketing for MKC in Moundridge, Kan. “This could be the fifth year in a row that we’ve been crying wolf.”
Whenever the industry had the capacity and Mother Nature allowed us to circulate the product, the spring rains delayed application and allowed us to reload stocks, he said. “But we’ve sidestepped supply and demand, and I think it’s possible that due to (lower production) during the winter months, product is tightening in some markets as we approach. of spring.”
Growers need to talk to their dealers, said Cheryl Schmura, vice president of crop nutrients for CHS. âThis high-priced inventory has created a wall,â she said. But just as producers should have an open line of communication with their bank about the issues they are facing, they should “talk to their dealers so that there is ongoing communication so that as things change, you can stay in phase â.
Susanne Stahl can be reached at firstname.lastname@example.org