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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Fertilizer prices falling but few are buying
  • Date: Tue, 06 Jan 2009 11:10:47 -0700



Fertilizer prices falling but few are buying
http://www.startribune.com/business/37123629.html

By MATT McKINNEY, Star Tribune

January 5, 2009

For proof that the seller's market of 2008 no longer exists in agriculture
-- a market where tractors sold out, prices for farmland defied gravity and
commodities zoomed to the stratosphere -- look to fertilizer.

Sales have slowed dramatically in recent weeks, indicating farmers are
either waiting until the last minute to buy for the coming season or even
forgoing some fertilizers.

"There's been a major correction underway," said Bill Bond, executive
director of the Minnesota Crop Production Retailers Association. He's heard
that prices have dropped 50 percent or more since fall. "Everybody wants to
be able to purchase wisely, but this market has really been swinging as of
late."

Fertilizer purchases are running about 60 percent of normal, said a company
official at CHS, the grain and energy cooperative.

"There is very good, logical sense behind that," said Mark Palmquist,
executive vice president and chief operating officer at CHS.

Prices for grain and oilseeds are down from their blockbuster highs of last
summer, meaning there's less money to pay off high fertilizer bills. Global
demand for fertilizer, meanwhile, fell off as prices rose, adding to
supplies and further depressing prices.

The slowdown appears like a gathering storm in the second-quarter earnings
released Monday by Mosaic, the Plymouth-based producer of potash and
phosphate, two key fertilizer ingredients. Even though the company reported
better-than-expected earnings of nearly $1 billion for the quarter, it
warned of sluggish sales and a slowdown in production in the quarters
ahead.

"Worldwide crop nutrient sales dropped sharply," in the quarter, said
company CEO Jim Prokopanko, in the company's release. He predicted weaker
sales through "at least" the third quarter.

While revenue rose 37 percent during the quarter, to $3 billion, sales
dropped sharply near the end of the quarter, which closed Nov. 30,
Prokopanko said.

The expected sluggishness has the company planning a further cut in potash
production of up to 1 million tons by the end of the fourth quarter. An
earlier cut of 1 million tons, about 10 percent of the total, was completed
last month.

A federal lawsuit filed four months ago in Minneapolis accuses the
fertilizer giant of colluding with a handful of other fertilizer companies
from around the world to drive up potash prices. The company has denied the
allegations.

Phosphate prices averaged $1,083 per ton during the quarter, more than
double the year-ago price of $417 per ton, the company said. It didn't
release prices since then. Phosphate sales, which make about half of
company revenues, fell 46 percent by volume in the second quarter, the
company reported.

Mosaic expects prices to drop significantly in coming quarters, it
reported.

The price drop has made buying fertilizer much more risky than usual, said
one analyst.

"A fair amount of farmers and retailers did buy it last summer, and now
prices have dropped substantially. And so, it's like, who's going to be
left holding the bag?" said Alan Kluis, a commodities trader.

Some delays brought by bad weather may have saved farmers from buying
high-priced fertilizer: A rainy spring last year pushed back farm season
and delayed the harvest, interfering with the usual schedule of buying and
spreading fertilizers in the fall for the next season's crop.

"It's clear that there wasn't as much anhydrous ammonia put down this
fall," said Bond, of the retailers association. "What will occur in the
spring remains to be seen."

Fertilizers are necessary in many areas and farmers will eventually need to
buy in. Palmquist of CHS said planning decisions that are usually wrapped
up by mid-January may stretch into next month as farmers wait until the
last minute.

"My concern is the availability of supply towards the tail end of spring
season," he said.

The result: Prices will probably go back up.




  • [Livingontheland] Fertilizer prices falling but few are buying, Tradingpost, 01/06/2009

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