When nitrogen fertilizer prices are on the rise, as they are now, the finger of blame usually points at natural gas prices.
This time around there’s a new culprit to hold responsible – ethanol.
The phenomenal growth of the ethanol industry in the United States is fueling a sharp rise in corn acreage and prices.
Corn is a huge consumer of fertilizer and much of the new corn acreage will replace soybeans, which self generates most of its nitrogen needs.
Growers will want to maximize their corn yields to take advantage of high prices and are expected to pour on the nitrogen fertilizer.
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When that is taken into account, farmers in Western Canada can almost certainly expect higher nitrogen prices this spring, along with tight supplies and perhaps shortages.
“I’m telling retail dealers to expect allocation of product this spring,” said Dean Andersen, account manager with Westco Fertilizers.
Daniel Cole, of the U.S.-based fertilizer industry trade publication Green Markets, agreed.
“If you haven’t positioned yourself now for the spring season, you may be on the outside looking in,” he said.
Prairie fertilizer dealers say they’re getting lots of calls from farmers asking what they should be doing about fertilizer this spring.
“It’s hard to tell them what to expect in terms of prices,” said John Rathgeber of Wendland Ag Services in Rosthern, Sask., adding he has been warned by suppliers to be ready for shortages.
Sheila Lupul of Top Yield Fertilizers of Andrew, Alta., said farmers are getting nervous and calling to ask about the price outlook for the spring.
“It’s hard to tell them anything because we just don’t know,” she said.
“Sometimes we’ll get three or four price updates in a day from the manufacturer. It’s really volatile.”
Cole said the expectations of tight supplies are already being reflected in prices.
In the U.S. midwest, the retail price of ammonia a year ago was around $550 US per tonne. Last fall it dipped to $400 as natural gas prices eased off. Now it’s back up to $500 and rising.
Agriculture Canada is forecasting a 4.8 percent in fertilizer expenses for Canadian farmers this year, made up of a 3.8 percent increase in prices and a one percent increase in volume.
Another factor affecting the nitrogen market is that much of the production has shifted overseas in recent years due to lower production costs and the mothballing of North American plants.
That makes it difficult to ramp up production to meet any unexpected increase in demand. New global production capacity is expected to be up and running over the next six months, but that doesn’t help the situation this spring.
Cole said the availability of product will also depend on the weather at planting time. A long, spread-out planting season would make it easier to maintain a steady supply than a truncated seeding period when everyone wants product at the same time.
Andersen expects a one million tonne shortfall in nitrogen supply relative to demand in the U.S., which will have a ripple effect in Western Canada.
Phosphate could also be in short supply this spring, he said. Domestic production is down from last year, imports are lagging, U.S. inventories are tight and demand south of the border will be higher.
“It looks to me like there’s going to be a shortfall of phosphate,” he said.
