By Frank Giles
April was a busy month for the AgNet Media team. On top of our normal duties, we also hosted the Florida Grower Citrus Show in Fort Pierce. This was after much thoughtful deliberation and planning that included changing the format of the event. Since this was the first time hosting the show since it was acquired last year, it was not something the team took lightly. We knew it needed refreshing, so we set out to do just that.
The good news is we were successful in the endeavor thanks to all those who attended and the exhibitors and sponsors who supported the event. I’d like to especially thank the University of Florida Institute of Food and Agricultural Sciences, U.S. Department of Agriculture and the Indian River Citrus League for their partnership in making the event a hit. See more on the Florida Grower Citrus Show here.
HIGH VOLATILITY
The fertilizer market has been greatly disrupted by world events in the past few years, resulting in price spikes for key nutrients necessary to grow crops. Jason Troendle, an economist with The Fertilizer Institute, took show attendees on a deep dive into the various factors that have been impacting the market in recent years.
“The United States has a really large agricultural industry that consumes about 10% of global nutrients,” Troendle said. “That means 90% of consumption occurs outside of the United States, so what happens outside of our borders really does matter. It is an incredibly global market.”
Natural gas market volatility has played a large role in the situation. Natural gas is the main building block of ammonia, which is the base of nitrogen production.
“Over the past few years, we’ve seen incredibly volatile natural gas prices,” Troendle said. “Two years ago, we were at about $2.40 (per million Btu), and today we are at about $2.13, which is great, but we were at almost $10 last summer.”
These price swings made it very difficult for fertilizer producers to operate. Some even shuttered production, which only increased the price as supplies fell.
The Russian invasion of Ukraine has played a big role in fertilizer production and market volatility. Russia is one of the largest nutrient producers in the world, so the war contributed to the price situation. Ukraine also produces a sizable amount of global fertilizer supplies, which only complicates matters.
China, also a major producer of fertilizer, banned its own exports in order to preserve domestic supplies. This took a sizable amount of nitrogen and phosphate off the market.
WHAT TO WATCH
Troendle said what happens next in the nutrient supply and demand scenario will continue to be driven by global events.
“For nitrogen, phosphorous and potassium, here’s what we are really watching that would impact the prices you are paying for those nutrients: on the nitrogen side, natural gas (supply/price) both in Europe and United States, the clearance of Russian exports and which countries are accepting natural gas from Russia or changes with sanctions,” he said. “Also, what is going to happen with Chinese export restrictions on fertilizer? They have restricted nitrogen and phosphate.”
Phosphate prices will be driven by the cost of all its raw material components. That includes natural gas, phosphate rock and sulfur prices, all of which are involved in its production. They have felt inflationary pressures like everything else in the past year.
Other factors will play an important role in the fertilizer market such as the price for commodities relative to the cost for fertilizer.
“If crop prices and fertilizers stay in relatively normal range, we’d anticipate fertilizer demand to stay fairly high,” Troendle said. “If those prices get out of whack, we might expect some significant demand destruction for fertilizer because growers simply can’t afford it or choose not to purchase it. But, right now, those two things seem to be in an OK place for most crops.”