BELLE PLAINE, Sask. – The fertilizer market is stabilizing after a year that saw prices plummet after record highs, says the head of the world’s largest supplier.
Jorgen Ole Haslestad, president and chief executive officer of Yara International ASA, said the business will likely be volatile in the short-term as the world comes out of the financial crisis.
Farmers have started to increase their purchases since prices dropped, he said.
“We saw the price of fertilizer peaking to an extent which was not sustainable,” he told reporters during his first visit to Yara Belle Plaine Inc. last week. “Farmers said they couldn’t afford it.”
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Phosphate and urea prices have returned to near normal levels, Haslestad said.
“Where we are hampered still by too high prices is in the potash area,” he said.
“Potash prices haven’t come down yet and we still see for us on the NPK side, which is a compounded product where we are banding nitrogen, potash and phosphate, the potash portion is too high.”
Yara International typically relies on NPK for about 30 percent of its volume but has curtailed production to about half of normal until potash prices are more sustainable, he said, adding that European farmers applied 50 percent less potash last season because of the high price.
“We have also seen good harvesting seasons in Europe for grain and that has also helped the farmers say ‘OK we will reduce inputs a bit’, ” Haslestad added. “It is price affected, no question about that.”
Farmers can get away with a break from potash application but not nitrogen, he said.
Yara Belle Plaine is the largest urea plant in North America.
Haslestad’s visit marked the completion of a two-year expansion and one year of ownership by the Norwegian company.
Yara bought the former Saskferco plant in October 2008 for $1.6 billion.
The $84 million expansion began in September 2007 when the plant was owned by Mosaic Co. and the provincial Crown Investments Corp.
It increased daily capacity by 400 tonnes of urea, or about 15 percent annually.
This is the third expansion to the plant and Haslestad said Yara has no immediate plans for another. However, he noted that falling natural gas prices in Saskatchewan make production more attractive.
“It is interesting to see that this plant … has become much more cost efficient now than it was only a couple years ago,” he said.
Yara International reported Oct. 20 its third-quarter financial results were “non-satisfactory” mainly because of low NPK sales.
“Deliveries in Europe and North America continue to be subdued by distributors still unwilling to build inventories for the spring application,” said Haslestad.
He said these two regions along with parts of Latin America were hardest hit while the Asian market was stable.
Many Yara customers were stuck with product in expensive storage.
He said there were also farmers holding supply on their farms, which is now being used and should have farmers looking to buy again.
