Urea and phosphate shipments that have been stuck on American barges stalled by flooding may be in bad shape
Farmers should be wary about the quality of some of the urea and phosphate hitting the market this summer, says an industry official.
Fertilizer has been sitting on barges for months in the U.S. river system and subjected to torrential rains.
“There’s going to be some pretty poor quality fertilizer that is going to come off the river when barges start to move,” said Matthew Rosgen, fertilizer merchandising leader with Cargill.
The Mississippi River navigation season usually opens on March 15, but this year the barges won’t be arriving in Minneapolis-Saint Paul until mid-to-late June because of excessive rainfall and flooding.
“The river system is a complete mess,” said Rosgen.
Fertilizer barges are supposed to be watertight, but they are not, and fertilizer and water do not mix. It causes clumping and degradation of the product.
“There will be brokers that will try to sell that at a price that’s too good to be true,” he said.
Rosgen warned growers to beware of phenomenal deals being offered up by non-traditional suppliers.
“It’s kind of like the guy with the speakers in the back of his van. Just be cautious of that,” he said.
Urea prices started to fall last week, dropping US$5 per short ton in New Orleans. Rosgen said there is speculation they will continue to fall throughout the summer as is the historical pattern. They could drop another US$10 to $15 per short ton.
However, there are also some unusual market factors at work this year.
Grain market analysts are forecasting a record amount of corn will go unplanted. Corn is a big user of nitrogen fertilizer, so that will reduce demand for the product.
As well, the corn that did get seeded may not be receiving as much nitrogen fertilizer as usual because the yield potential has been reduced due to late planting.
“That is definitely something that I know we’re paying attention to,” he said.
“Supply and demand would suggest if there’s a bunch of urea lying around, the price will have to go down to find homes.”
The other big factor is the flooded and clogged river system, which is preventing product from moving north. It is sitting south of St. Louis.
That has caused a temporary spike in urea prices in the northern United States. Prices will fall once that glut of fertilizer starts moving.
Rosgen said prices in Western Canada are inextricably tied to what is happening south of the border. However, the Canadian dollar is weaker than it was this time last year, so any decline in prices will be partially offset by foreign exchange.
Another factor that will keep prices from plummeting is the fertilizer inventory in Western Canada. It’s not like two years ago when oversupply caused prices to fall.
“That’s not the case this year. There’s just not as much stuff lying around Western Canada,” said Rosgen.
“I’m not sure we’re going to see the sweetheart deals that everybody is maybe thinking that we’re going to see.”