Crop producers who put off buying chemical inputs for the 2022 growing season might find themselves missing out on some products and paying dramatically higher prices for those that are available.
Farmers need to be discussing their needs with their retailers sooner rather than later, said Travis Rowe, vice president of agronomy for Heritage Cooperative.
This year will require more communication and planning to get customers the products they need, as well as flexibility, he said, adding, “The exact product we want may not be available at the exact time we want it.”
Ordinarily, fertilizer and other input prices track closely with grain prices, Rowe pointed out. This year, however, the prices aren’t as closely coupled, due to other factors influencing the supply chain.
Kathy Mathers, vice president of public affairs for The Fertilizer Institute, said it’s unusual for so many factors to push prices upward at the same time. Fertilizer prices are generally closely linked to commodity prices, Mathers said.
Demand for fertilizer tends to increase with crop prices as farmers try to increase production to capture those higher prices, she said.
For example, almost 50% of U.S. nutrients are used for corn and over the last 20 years there’s been a correlation of almost 85% between monthly corn prices and the index of fertilizer prices farmers paid. The U.S. Department of Agriculture’s projected season-average corn prices for 2021-22 are up significantly, one factor influencing fertilizer prices.
This year, natural disasters are contributing to higher fertilizer prices as well, Mathers said. About 60% of the ammonia production capacity in the U.S. is in Texas, Oklahoma and Louisiana — states affected by ice storms last February and Hurricane Ida this summer. Processing plants were shut down for days or weeks, reducing production.
“Those plants are engineered to run 24-7-365,” she said.
COVID-19 has affected production, as well, because some manufacturers delayed scheduled maintenance last year to minimize the number of contractors in the plants, Mathers said. That maintenance can’t be delayed indefinitely, so production has dropped in some facilities while maintenance is being done.
Higher transportation costs are also pushing fertilizer prices higher, she said. So are higher prices for the natural gas used in ammonia production. Between 70 and 90% of the cost of production for ammonia is natural gas, and gas prices have increased 217% since April of 2021.
Global supply and demand play a part in fertilizer price levels, too. That’s especially true for potash because the U.S. imports about 90% of the potash used here, Mathers said. In comparison, the U.S. imported 27% of its nitrogen supply and 15% of its supply of phosphate in 2020.
One factor responsible for the last big run-up in fertilizer prices in 2008 was a drop in U.S. ammonia production. That isn’t the case this time around. There is increased production capacity, she said.
Although fertilizer prices have been moving upward, they haven’t reached the highs farmers saw in 2008.
“We’re still below where we were in 2008 in terms of prices,” she said.
Supply shortages are leading to higher prices for several popular herbicides, according to Mike Erwin, general manager for KOVA of Ohio, a statewide wholesale distributor for crop protection products.
“Prices are going up every day,” he said.
In mid-October, Erwin prepaid for some glyphosate to be delivered in January. Then, he called his supplier back to buy more, but no more was available for January and supplies were uncertain for February delivery.
“This thing is a train wreck,” he said.
Erwin is seeing shortages for glyphosate (Roundup) and glufosinate (Liberty), as well as other common products such as 2,4-D and Atrazine.
He traces the cause to the lack of U.S. manufacturing capacity for both active ingredients and inert ingredients used in the products. Most of those ingredients are imported from China, Erwin explained. Shipping delays are causing part of the problem, but the larger issue is production cutbacks in China.
For instance, in preparation for the upcoming winter Olympics, China is putting restrictions on pollution-generating industries such as chemical manufacturers. The high cost of products now and the uncertainty about prices in the future is making it difficult for suppliers to justify building up inventory.
Erwin is buying products if he knows he has them sold, but it doesn’t make sense to speculate on additional products.
“You can’t afford today to sit on a bunch of inventory,” he said.
Greg Culp, agronomy sales and marketing director for Mercer Landmark, said he’s seeing some growers attempting to purchase many of their 2022 crop protection products earlier than in traditional years.
In the past, Mercer Landmark has been able to order enough glyphosate for the upcoming season and lock in pricing, Culp said. This year, because of uncertainty in the supply chain and rising shipping costs, Mercer Landmark is only selling the product that’s been delivered to its facilities.
Culp said he’s optimistic that they will have most of the supply they’ve been accustomed to, but he expects some level of shortages.
The glufosinate market is challenging as well, Culp said, “We’ve been able to work with our manufacturing and distribution partners to source a large percentage of our needs for the 2022 season, but it won’t arrive all at once, and some may be just in time.”
Chris Henney, president and chief executive officer of the Ohio Agribusiness Association said agricultural retailers are doing their best to get customers the products they need for the coming growing season. If products aren’t available, retailers will be working to find alternatives. It’s an advantage to have a long-standing relationship with suppliers this year, Henney added. “Now is the time when they’re rewarding loyalty.”
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