Short supplies, higher prices expected for fertilizers and herbicides in 2022
Crop growers who postpone the purchase of chemical inputs for the 2022 growing season could find themselves running out of some produce and paying significantly higher prices for those that are available.
Farmers should discuss their needs with their retailers as early as possible, said Travis Rowe, vice president of agronomy for Heritage Cooperative.
This year, it will take more communication and planning to provide customers with the products they need, as well as flexibility, he said, adding, “The exact product we want may not be available at the moment. exactly when we want it.
Usually, the prices of fertilizers and other inputs closely follow grain prices, Rowe said. This year, however, prices are not as closely related, due to other factors influencing the supply chain.
Kathy Mathers, vice president of public affairs for the Fertilizer Institute, said it was unusual for so many factors to drive up prices at the same time. Fertilizer prices are generally closely related to commodity prices, Mathers said.
Demand for fertilizer tends to increase with crop prices as farmers try to increase production to take advantage of these higher prices, she said.
For example, almost 50% of American nutrients are used for corn, and over the past 20 years, there has been a correlation of almost 85% between monthly corn prices and the fertilizer price index paid by Farmers. Seasonal average corn prices projected by the US Department of Agriculture for 2021-2022 are significantly higher, a factor influencing fertilizer prices.
This year, natural disasters are also contributing to the rise in fertilizer prices, Mathers said. About 60% of the ammonia production capacity in the United States is in Texas, Oklahoma and Louisiana, states affected by ice storms last February and Hurricane Ida this summer. Processing plants were closed for days or weeks, reducing production.
“These factories are designed to operate 24-7-365,” she said.
COVID-19 has also affected production, as some manufacturers delayed scheduled maintenance last year to minimize the number of contractors in factories, Mathers said. This maintenance cannot be delayed indefinitely, so production has dropped in some facilities while maintenance is in progress.
Higher transportation costs also push up fertilizer prices, she said. The same is true for the higher prices of natural gas used in the production of ammonia. Between 70% and 90% of the cost of producing ammonia is natural gas, and gas prices have increased 217% since April 2021.
Global supply and demand also play a role in fertilizer price levels. This is especially true for potash, as the United States imports about 90% of the potash used here, Mathers said. By comparison, the United States imported 27% of its nitrogen supply and 15% of its phosphate supply in 2020.
One of the factors responsible for the last major increase in fertilizer prices in 2008 was the decline in ammonia production in the United States. This is not the case this time around. There is an increase in production capacity, she said.
Although fertilizer prices rose, they did not reach the highs farmers reached in 2008.
“We are still below what we were in 2008 in terms of price,” she said.
Concerns about herbicides
Supply shortages are driving up the prices of several popular herbicides, according to Mike Erwin, general manager of KOVA of Ohio, a statewide wholesale distributor of crop protection products.
“Prices are increasing every day,” he said.
In mid-October, Erwin prepaid for glyphosate to be delivered in January. Then he called his supplier back to buy more, but there was none left for January and supplies were uncertain for delivery in February.
“This thing is a train wreck,” he said.
Erwin sees shortages of glyphosate (Roundup) and glufosinate (Liberty), as well as other common products such as 2,4-D and atrazine.
He finds the cause of the lack of manufacturing capacity in the United States for the active ingredients and inert ingredients used in the products. Most of these ingredients are imported from China, Erwin explained. Shipping delays are the root of the problem, but the biggest problem is the reduction in production in China.
For example, in view of the upcoming Winter Olympics, China is imposing restrictions on pollution-generating industries such as chemical manufacturers. The high cost of products today and price uncertainty in the future make it difficult for suppliers to justify stocking up.
Erwin buys products if he knows he sold them, but it makes no sense to speculate on additional products.
“You can’t afford today to sit on a pile of inventories,” he said.
Greg Culp, director of agronomic sales and marketing for Mercer Landmark, said he’s seeing some growers attempting to purchase many of their 2022 crop protection products earlier than traditional years.
In the past, Mercer Landmark has been able to order enough glyphosate for the coming season and lock in prices, Culp said. This year, due to uncertainty in the supply chain and rising shipping costs, Mercer Landmark is only selling the product that has been delivered to its facilities.
Culp said he was optimistic they would have most of the supply they were used to, but he expects some level of shortage.
The glufosinate market is also difficult, Culp said: “We have been able to work with our manufacturing and distribution partners to meet a large percentage of our needs for the 2022 season, but it will not happen all at once. , and some maybe just in time.
Chris Henney, president and CEO of the Ohio Agribusiness Association, said agricultural retailers are doing their best to provide customers with the products they need for the growing season ahead. If products are not available, retailers will try to find alternatives. It’s an advantage to have a long-standing relationship with suppliers this year, Henney added. “Now is the time when they reward loyalty. “
STAY INFORMED. SUBSCRIBE!
Up-to-date farming news delivered to your inbox!