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.
Was price induced
While all the data isn’t in, forecasts show “a 16 to 17 percent drop in U.S. nutrient use in 2009. That’s with almost no change in acres of the major crops. The entire drop in demand was price induced. In other words, application rates fell dramatically.”
Overall, nitrogen saw a 6 to 8 percent drop in 2008/2009, phosphate a 25 to 29 percent drop and potash a 32 to 36 percent drop. “Total use of N, P, and K — about 18 million tons of nutrients in 2009 — will be the lowest level in the United States since 1975.”
The impact of higher prices led to the highest usage drops in South America. “We saw large drops in Argentina and Brazil. China was down for the first time in many years.”
Bucking the trend, India’s fertilizer use was still up. That’s largely because India has a subsidy program where the price of fertilizer is fixed.
“Overall, the world saw a 2 percent drop in nitrogen … a 12 percent drop in phosphate … and a 19 percent drop in potash.”
This drove down prices from their historic highs.
In the United States, in response to the drop in demand and lower prices, “nitrogen production fell by 8 percent and phosphate production fell by 24 percent. North American potash production fell by 36 percent (there are now only two U.S. domestic producers of potash, so the data is combined with Canadian figures).”
The impact of the drop in demand is also clear with import numbers where nitrogen imports fell by 24 percent and potash fell by 43 percent.
2010 was hardly a smooth ride.
“Russian drought and wildfires caused a third drop in their (wheat) crop, with worldwide implications. On the soybean side, we have very strong exports mostly driven by the Chinese. The cotton market has turned around with world use exceeding production for the fifth straight year. With corn, the biggest surprise was USDA reducing yield estimates.”
In May 2010, the USDA came out with its first estimate of the new crop season. This was “before everyone had even finished planting corn. … We heard reports as the year went on, that the corn crop didn’t look as good as the USDA was projecting. Surprisingly, in August, they actually raised their yield estimate. Then, they seem to have caught up with what everyone else was observing — corn yields weren’t as good.
“If you look at what changed between May 2010 and the USDA’s report on Dec. 10, they started out with a yield of 163.5 bushels (per acre). They dropped that by nearly 10 bushels by December. … As a result, production estimates dropped by 6.2 percent, or over 830 million bushels.”