As farmers ponder their fall fertilizer purchases they should keep the global situation in mind.
International stocks are tight, and that could affect prices for Canadian farmers more than the traditional factor of natural gas costs.
Agrium spokesperson Richard Downey said rising demand for fertilizer around the world has created the situation.
Farmers in India, Pakistan, Vietnam and southeast Asia are all using more nitrogen and potash. The continuing agricultural expansion in South America has also added to demand.
“The market is very tight,” Downey said from Calgary. “That’s pushed prices significantly higher.”
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For example, urea in the Middle East cost $153 US per tonne last year; it’s $253 this year. Potash prices are at all-time highs.
Downey said the futures price for natural gas last week was sitting at $7 per MMBtu (million British thermal units) and that is high. If prices go higher, fertilizer price hikes are sure to follow.
“From our side it’s good,” he said. “From the farmer’s side, it’s not so good.”
Alberta’s Wild Rose Agricultural Producers tracks prices in that province. The September price for 46-0-0 urea was $422.83 Cdn per tonne, compared to $416.30 the previous September, while anhydrous ammonia, with applicator, was up to $669.58 from $660.58.
Executive director Rod Scarlett said the increase isn’t as dramatic as some years, but other costs are making up for it.
“Diesel is up 20 percent over last year and gas just went up seven cents a litre,” he said. “Steel has gone up dramatically and that impacts on machinery. Even barbed wire is up 20 percent.”
Cathy Hay, analyst at MJ Ervin & Associates in Calgary, said diesel prices are definitely showing the effects of higher crude oil prices.
Wholesale prices in Regina, for example, have risen 7.5 cents per litre since January, and were 12 cents higher this September than September 2003.
“There’s no end in sight here,” said Scarlett. “We’ve got really depressed prices for cattle and mixed prices for grains and oilseeds. Every little increase has a huge impact because the margins are non-existent.”
He said while farmers can avoid some costs, they likely have to fertilize.
Scarlett said one of the consequences of a good crop is a need to replenish the soil, whether farmers do it now or in spring.
“A lot (of purchasing decisions) will depend on what farmers had locked in for delivery of grains,” he said.
