What is in this article?:
• The uncertainties of price and supply at the farmer level have translated into lower supplies among fertilizer distributors.
• Harry Vroomen, vice-president for The Fertilizer Institute says the increased demand for fertilizer is not being pushed by increased acreage, rather by increased demand for higher yield.
INCREASED DEMAND for higher yields is driving increased demand for fertilizer worldwide.
Most used outside of U.S.
Vroomen points out that 86 percent of the world use of fertilizer is outside the U.S. It’s often the case, he says, that what has happened or is predicted to happen with crops in China, India, and Brazil has a bigger affect on fertilizer dynamics than what happens in the U.S.
In the past seven years increased demand for nitrogen has gone up by 23 percent worldwide. In that same time frame, demand for potash has increased by 32 percent worldwide.
The biggest increase in demand for these two crop nutrients came from China, India and Brazil.
Vroomen says that as yield expectations for crops increase worldwide, so will demand for nitrogen and potash.
Food production and fertilizer use vary widely from one region of the world to another, Vroomen points out. Worldwide, about five tons out of every six tons produced is used domestically. The amount of exports from crop to crop varies widely, from less than 10 percent for rice to about 35 percent for soybeans, but about 85 percent of the crops grown worldwide are consumed in the area in which they are grown.
In contrast, more than 40 percent of the world’s supply of fertilizer is sold outside the region in which it is produced. Ocean freight prices rose to record levels in 2008, and have been at high levels since that time, Vroomen points out. Freight costs alone add to the instability of fertilizer supply and demand.
Vroomen contends three primary factors — ocean freights, natural gas prices, and the cost of diesel fuel have a direct impact on fertilizer prices.
From a positive standpoint for 2012 prices, Vroomen says ocean freights and natural gas prices are down. Diesel fuel prices were on the rise in the first quarter of 2012, and remain high, but have fallen somewhat in the past couple of months.
Another positive indicator that fertilizer prices may stabilize throughout the growing season is increased production worldwide.
The International Fertilizer Association predicts there are as many as 250 projects in various stages of development globally that will increase fertilizer availability between now and the end of 2015.
The good news is that three new, large nitrogen plants are due to come on line this year. This increase in supply will likely have a positive impact on growers by lowering input costs.
The bad news is these new facilities are in the Middle East and Eastern Europe — two typically unstable regions of the world.