Why Are Pre Buys on Fertilizer Down

As I talk to customers it seems that there must be lower amounts of fertilizer being purchased this fall. I think that there is less fertilizer being purchased for a couple different reasons.

One is that there was a significant amount of equipment and infrastructure purchased by farmers in the spring while prices were double of today. There were many combines, bins and tractors purchased this past spring that I am some farmers would like to rescind their orders on. Calculating your ability to service the debt on a tractor with $15 canola versus $8.50 is much different. Pile on top of this a tightening credit market and spending is tight for inputs like fertilizer.

Secondly, there seems to be a deep conviction that due to Ag commodity prices dropping that fertilizer must due the same. This is more of the theory that I am following. As I have written before either Ag commodity prices are going up or fertilizer must come down. I think farmers are a little bitter to the huge drop in farm prices and locking in high fert prices now would be a double whammy to the income statement.

Across North America this will be a game of poker between the end user and the market makers. Get ready this will be one interesting winter in fertilizer pricing and purchasing

 

Shaun Haney

Shaun grew up on a family seed farm in Southern Alberta. Haney Farms produces, conditions and retails wheat, barley, canola and corn seed. Shaun Haney is the founder of RealAgriculture.com. @shaunhaney

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Anonymous

Some great thoughts on the fertilizer markets Shaun. There are a couple other factors to consider when deciding to buy fertilizer or not this fall.

1. Risk Management- instead of buying one time for all your fertilizer needs; buy 3-4 times to mitigate risk and use a moving average.

2. The North American market is behind on importing by roughly 2 million Mt of Urea. Many world buyers have stayed out of the market but will have to come back in the coming weeks. Watch for these softened prices to start to climb again.

3. The manufactures in western Canada are hoping that no one buys until spring. This way when spring rolls around there is no time to import additional product and the industry will see a sharp demand, low supply and a huge drive up in the price of fertilizer. The key manufacturers do this every year. In the history of the fertilizer in Western Canada only once have there been lower prices in the spring than in the fall.

4. The Ag industry is not built to service all growers in the spring. If everyone waits to buy and apply fertilizer some growers will not get serviced and supplied with product.

5. Anyone that tells you they have a magic boat load of fertilizer at 1/4 of the price in the world market is likely a scam. Why would someone sell to growers in western canada when they can sell it locally in the Ukraine for double the value? If you are from Alberta would you sell your canola into Saskatchewan for $4? Why would someone sell fertilizer for 1/2 the price into Western Canada. It doesn’t make sense!

6. Work with your Ag Retailer- keep communicating and let him know where you are interested in buying at. This will allow him to better position himself and you with product.

I look forward to other individual thoughts on the fertilizer market.

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