Fertilizer has been one of the hottest topics in agriculture over the past couple of years as prices and availability have ebbed and flowed, making it a busy time for those in the industry.
“The last 12 to 18 months have really been completely unprecedented in the number of questions we are getting about fertilizers, especially from outside of the sector,” said Laura Cross with the International Fertilizer Institute. “There has been a huge amount of volatility and uncertainty in these markets.”
Cross said the “significant” period of price inflation led to some of the volatility, but also a few recent developments contributed. The rise in crop market prices has led to increased demand for fertilizer, and global events play a role.
“Fertilizer markets sit directly between the energy markets and the food markets,” Cross said. “That means there is quite a lot of opportunity for disruption as we have seen in the last 12 months or so, even going back before the war in Ukraine and COVID era policies.”
However, despite the high prices, Cross said the idea of a fertilizer shortage in the world is a myth.
Josh Linville, fertilizer analyst with StoneX, said global events are having a significant impact on the U.S. fertilizer markets. Russia stopped exporting natural gas to Europe, which impacted production.
People are also reading…
“When that first started happening, the marketplace said it didn’t matter and ‘not that big of a deal’ because western and central Europe only accounts for 5% of the world,” Linville said. “Five percent of a really big number is still a very big number.”
Cross noted that demand for nitrogen is often constant, despite the price. The major fluctuations come from other forms of fertilizer.
“If the price of our crop changes, the nitrogen component in terms of farm level very rarely changes,” Cross said. “For phosphate and potash, you see a very clear response when crop prices are either stable or lower than normal.”
Linville added that the states in the Corn Belt, such as Iowa and Illinois, aren’t the ones that will drive the market.
“They plant corn year over year over year,” Linville said. “We put a lot of focus on building our demand models on the southern plains and northern plains and those fringe acres. Before the ethanol boom they were CRP or some other crop and now they are switching to corn.”
When examining previous fertilizer crunches in 1997 and 2008, Linville noted production increased to solve those issues. He said it is harder to get some of these production plants back online in this era with constantly changing government regulations.
“If you go to an investment firm, they want a multi-decade guaranteed investment on their money, but where are you going to put it?” he said. “Are you going to put it in the U.S.? I wouldn’t because we have a government that seems to not know what it wants to be every two to four years. It’s very difficult to pull to build a brand new facility.”
