From bad, to worse — logistics challenges and price of fertilizer only going one direction, for now


In the near term, at least, all bets are off as to just how high fertilizer prices might climb.

“We already had situation where last fall, China had stepped out and said ‘no more exports of fertilizer, phosphate and nitrogen.’ That was bad. Now all of a sudden we are talking about removing Russia. That is worse,” says Josh Linville, director of fertilizer for StoneX, speaking with RealAgriculture at Commodity Classic in New Orleans.

Russia is a major player in the world fertilizer market. For urea, they’re responsible for approximately 14 per cent of global exports. For potash, they account for almost 20 per cent of the global capacity, and represent about 10 per cent of the global phosphate market. The country is also a huge producer of energy for Europe and other countries.

Between China and Russia, he says, the world supply of nitrogen fertilizer is down about 25 per cent; looking at phosphate, it’s closer to 40 to 45 per cent of the global phosphate export market.

All of that lost supply is pushing prices high, and likely to continue moving them higher, Linville says. That said, there is fertilizer in North America to grow the ’22 crop. Our bigger challenge, to add insult to injury, is logistics.

“We’re ahead on imports; I think we have enough product sitting around. My biggest fear for North America is not supply driven. It is logistics. Trucks are very hard to find. You’ve got kids flipping burgers, making 15 bucks an hour. [It’s] very hard to find somebody wanting to drive a truck cross country, It’s hard to find trucks that can go across the border to Canada and back. The lower Mississippi River is dealing with almost flood-stage flows, which is going to restrict traffic; railroads have been dealing with suffering on their service. Everything on the logistical side is already in a bad shape. We need that to run optimally. Any hiccup is gonna be felt,” he says.

(Editor’s note: Oh, do you mean like a hiccup of a rail service labour disruption?)

All of this uncertainty also has many asking how to manage the risk. Do you buy and hold? Do you book as far in the future as you can?

“My short answer is no,” Linville says. “We’re in the middle of a hurricane, we’re in the middle of the storm, it’s really hard to see your way out right now. Everything looks like that graph is gonna go up and we’re always gonna see stronger prices. And you better do it today. We did the same thing in ’08. Everybody thought is going to $2,000. And then it didn’t. But eventually things will normalize; the Russia Ukraine thing will hopefully go away; China will start to export demand will start to drop grain prices will start to slow down.

“I am not a big fan of going out and securing something for 12 months out at record high prices. Could it be higher? Absolutely. But I am not a proponent of doing that today, I wouldn’t want to lock that in. I’d rather wait and see what happens,” he says.

More here, recorded at Commodity Classic ’22 in New Orleans:

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