What is in this article?:
• During the 1960s, 1970s and 1980s, world nutrient demand rose in a fairly predictable fashion. That made it relatively easy to plan new nitrogen plants, new mines and things like that.
• Such ease of planning was wiped away in 1989 with the collapse of the Soviet Union.
• Several factors should lead to increases in long-term fertilizer demand.
Until recent years, fertilizer prices had held relatively steady for U.S. farmers. Then, in 2008, fertilizer prices made a rapid, alarming ascent before hitting record levels in the fall.
Several years later, still-skittish farmers haven’t forgotten that 2008 price run-up and many wonder what 2011 might bring. The National Corn Growers Association tried to provide growers some answers during a recent Webinar.
“We have nearly 80 million new mouths to feed annually,” said Harry Vroomen, vice-president of economic services at The Fertilizer Institute (TFI). Heading into 2011, “world grain stocks are relatively low and U.S. farm income is strong. The world and United States will be growing out of recession.”
It should be noted that because TFI represents the fertilizer industry, the U.S. Department of Justice “prohibits us from making explicit fertilizer price forecasts. … But I will discuss the supply/demand factors driving the market.”
Fertilizing materials “are commodities like corn, soybeans and wheat,” Vroomen reminded his audience. “They’re priced in U.S. dollars around the world and traded widely.
“Many of the same fundamentals that caused record grain prices in 2008 led to the record fertilizer prices in a combination of demand-pull and cost-push factors. Significantly higher transportation costs, the falling value of the U.S. dollar and other factors also played a role.”
During the 1960s, 1970s and 1980s, “world nutrient demand rose in a fairly predictable fashion. That made it relatively easy to plan new nitrogen plants, new mines and things like that.”
Such ease of planning was wiped away in 1989 with the collapse of the Soviet Union. The collapse of Communism meant nutrient demands in the region declined by 70 to 90 percent. European policies “also resulted in a continuous decline in demand in that region. Overall, nutrient demand fell by 17 percent over a five-year period (of 1990 through 1995).
“Imagine if world corn demand fell by 17 percent and the impact that would have on the corn market.”