Looking back to last fall after fertilizer inventories were wiped out, there was cause for concern on what shortage issues we may face come spring, but the markets are proving the opposite to be true.
Josh Linville, fertilizer director for StoneX, says one uncertainty is sometimes the only certainty when it comes to the volatility that has been the fertilizer market over the past 24 months.
“The market is once again proving that none of us know what in the world we’re talking about,” jokes Linville. “We’re talking all the way through the winter about what happens if we have an early spring, and what do we do from inventories and getting product in place in time and storage not being filled. Well, here we are, and we’ve seen very little in the way of spring fertilizer application.”
Linville says in the U.S., only 22 per cent of corn crops have been planted. The country also seems to be divided by conditions that are too dry or too wet, much to what we are seeing in parts of Canada, and the conditions just haven’t been ideal for fertilizer application.
Due to this we are seeing the opposite of what was softly predicted, or expected, last fall. Instead of worrying about having enough fertilizer in storage to keep up with demand, companies are patiently waiting for the demand. It’s not to say that it won’t come, however; what the potential issue is now, is when producers do pull the trigger and start spreading fertilizer, that demand is going to possibly, likely, cause a logistical nightmare.
“I’m afraid the demand is a little bit like the water behind the dam, it’s growing by the day. If we are not losing a tremendous amount of, let’s say, corn acres, if we’re not going to drop that number further and all the demand is still there,” says Linville. “Eventually that dam is going to break and that demand has got to come forward and when it does it’s gonna be a very short window which is gonna put that much more stress on the logistical market.”
Additionally, Linville says that everyday that the Russia/Ukraine war continues, is another day that countries like Russia and Belarus get slowly cut out of the marketplace. Collectively, Russia and Belarus account for 40 per cent of global potash exports, which is no small feat to make up.
We have heard of a couple Mosaic mines that have ramped up production as a result, however this was expected and therefore isn’t the end-all-be-all solution that is needed.
When we are talking phosphorus and nitrogen, there is another global contender that is squeezing exports. “It’s not just this war. It’s also the Chinese government, who is restricting exports on phosphate and nitrogen. Because global prices are so high because global supplies are so tight. They’re ensuring there’s enough pie for their own people,” says Linville.
In the event that all of these problems go away tomorrow, Linville says that we would likely see a drop in prices sooner rather than later; however, the supply issues would still need tending to. This is something that many are stating will be felt into the 2023 growing season: a backdated pain, if you will.
Reality remains that solutions have not been found and input prices remain high. In this current scape, Linville says to seize the opportunity while commodity prices are seeing equally high prices.
“At the end of the day, we need to sit there and look at our own organization,” says Linville, ” We have an opportunity to lock in a profit on our farm by locking in the inputs and the outputs. We don’t need to be worried about what if the column price goes up more than fertilizer price goes down. If we get an opportunity to lock in a profit, we do that on a part of our input output data. That’s a good thing.”
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