Fertilizer prices have jumped since the fall.
To David Rolfe, there’s little reason to believe they are going to peak and fall before farmers need to buy what they need for their 2008 crop.
“It’s going to mean even higher prices in the spring,” said Rolfe, president of Keystone Agricultural Producers.
That means farmers will have to spend much of the money they are now making from high grain prices on inputs for the next crop.
“Producers are going to need to lock in supplies early and try to negotiate the best deal they can with their dealer,” Rolfe said.
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Some farmers may be reluctant to buy fertilizer because of the increasing prices, but the smart money is on prices going higher, said David MacKay of the Canadian Association of Agri Retailers.
His members aren’t gambling on prices going south before spring seeding.
“Every one of my members right now is trying to grab as much supply as they possibly can,” said MacKay, who represents input and equipment dealers.
Price concerns may not be a smart thing for farmers to worry about, he added.
“This is an extraordinary year, when it won’t just be a matter of where the fertilizer is priced, but whether you can actually even acquire it,” he said.
“And we’re talking N, P and K. The supplies are already tight.”
Rising nitrogen fertilizer prices angered many farmers last year. So far 2008 has added salt to the wounds.
Urea 46-0-0 prices in central Manitoba have risen to $600 per tonne this month from $559 in December 2007, according to KAP research.
Other fertilizers have similarly increased by about $40 per tonne, with a common central Manitoba price of $650 for 12-51-0 and $400 for sulfur 21-0-0-24.
This increase is coming while natural gas, the key component for nitrogen fertilizer, has seen its price stay relatively flat. While there have been major surges and slumps since last summer, prices today are about where they were between May and July. Yet prices of nitrogen fertilizer are much higher.
This phenomenon has outraged many farmers, and KAP conducted its own investigation of input prices to see if price-fixing was occurring. Its conclusion, released in the fall, was that Manitoba fertilizer prices were often far above North Dakota prices. It urged the federal Competition Bureau to investigate the situation for collusion.
The bureau denied the request.
MacKay said farmers are barking up the wrong tree if they believe a manufacturer conspiracy is behind the surge in fertilizer prices, even though limited manufacturing capacity rather than natural gas prices are the chief cause of the price escalation.
Manufacturers compete with each other, but they also compete in the world market.
Fertilizers from Israel, Brazil and Russia have arrived in Canada and not driven down the price. And Canadian-made fertilizers are being sold to foreign buyers when prices overseas are more attractive than Canadian domestic prices.
“If the Canadian manufactured products stayed in Canada we might all be fine, but this is a worldwide market,” MacKay said.
Manufacturers may be making good money now, but it’s not a situation they foresaw, which MacKay said is proven by the fact some plants were closed or shrunk in recent years before the price hike.
No manufacturer would do that if they were able to predict or cause higher prices.
