Slowdown in sales softens fertilizer market

(Photo courtesy Agrium)

CNS Canada — A lack of buying throughout North and South America has put fertilizer prices under pressure, but so far, no one is lining up to capitalize on the weakness, according to an industry watcher.

“Farmers aren’t in the mood to buy fall fertilizer. I think they’re more uncertain this year than they normally are,” said David Asbridge, president of NPK Fertilizer Advisory Service in Missouri. He cited declining crop prices across the board as the reason for the uncertainty.

Whether it’s supplies of nitrogen, phosphate or potash, Asbridge said there is definitely more supply than demand at this point.

“People hate buying into a falling market; they figure it is falling so they say ‘We’ll just wait and see how much further it’s going to go down.'”.

Brazil is another big factor in the equation. Due to the weakness of its currency, the real, versus the U.S. dollar, Brazilian farmers have been very reluctant to import supplies, according to Asbridge.

“They are probably 20 to 25 per cent behind their total imports… they’ve backed out of the market at a time when they should be active, which had put a depression on the fertilizer industry,” he said.

The pessimistic tone isn’t being felt as acutely in Canada, though, according to one farmer leader.

“It depends on the individual, some guys wait until the spring, but I always buy in the fall,” said Norm Hall, president of the Agricultural Producers Association of Saskatchewan.

Hall is a firm believer that if you have the cash, it pays to buy before the spring, he said.

However, he acknowledged there are some years when the market throws producers a curveball.

“There have been a couple of years, 2008 or 2009, we saw a huge spike of fertilizer price in the fall. Then it dropped back in the spring; that hurt.”

If there is one type of fertilizer Asbridge is watching more closely than others, it’s likely ammonia.

“We’re beginning to worry because ammonia price is high relative to crop prices. So they (farmers) may switch to urea or wait until next spring,” he explained.

Because of this, he said, the market will likely continue to ride lower for the foreseeable future.

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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