Tight supplies on hand | Lowered North American prices reduced nitrogen imports
Growers in Western Canada could be facing a nitrogen fertilizer shortage this spring.
“It’s probably not time to press the panic button, but in terms of nitrogen, it’s getting tight,” said Brian Kenyon, director of sales and marketing for Yara.
He has polled growers at various meetings and events, and nobody is indicating they intend to apply less nitrogen fertilizer this spring than they did last year.
“The odds of us being able to move the volumes that the farmers are talking about are very low, but it’s January,” said Kenyon.
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Canadian urea shipments were down 22 percent during the July to September period last year, according to Statistics Canada.
The situation hasn’t improved much in the second quarter, based on Yara’s sales. Western Canadian shipments were way down in October and November, and Kenyon doesn’t expect big December numbers either.
He said the lackluster demand is the result of growers waiting for prices to fall and a lack of on-farm storage because of last year’s large harvest and poor grain movement.
Statistics Canada will release official numbers for the second quarter Feb. 15.
Kenyon said there would have to be record shipments every month for the last half of the fertilizer marketing year to make up for the first half deficit.
“I don’t see how we can possibly hit the urea volumes that we did last year,” he said.
Richard Downey, a spokesperson for Agrium Inc., agreed with that assessment.
“You’ve seen urea prices go up globally and in North America because I think there’s a view generally across North America that the import levels were fairly weak earlier in the year, and there is some concern that urea inventories within North America aren’t where they need to be for the spring,” he said.
The urea price in New Orleans, Louisiana, (NOLA) recently peaked at $420 (US) per short ton, up from $285 in the fall.
The NOLA price was below the world price in October and November because of limited fall fertilizer demand in the U.S. due to the late harvest, which prevented regular fall field work.
The dismal North American price reduced the amount of imported nitrogen fertilizer coming into the United States, causing a supply shortage that was exacerbated by production problems at North American manufacturing facilities.
What little product that was available was snapped up by winter wheat growers in Texas, who had decent moisture for the first time in years and wanted to top-dress their crops.
The shortfall led to a run-up in NOLA prices to the point where imports are once again coming into the market. However, it could be a case of too little, too late.
“That’s a pretty common perception, that inventories are going to be fairly tight as we head into spring here,” said Downey.
Prices are reaching the point where companies are considering importing product into Western Canada to help offset the growing nitrogen fertilizer deficit.
“The prices are going to stay high because we need imports to come in here now because there isn’t enough product based on traditional shipping patterns,” said Kenyon.
He estimates 100,000 to 200,000 tonnes of nitrogen fertilizer production has been lost because of unscheduled plant shutdowns.
Western Canada exports 1.3 to 1.6 million tonnes of urea to the U.S. annually. Some growers wonder why fertilizer companies don’t just stop those exports and redirect the supplies to Canadian farmers.
Kenyon said he can’t abandon his U.S. customers, but he can bring in product from the U.S.
“I’m trying to figure out, can we do it? Can we bring in production to offset some of our production issues?”
It will depend on whether growers are willing to pay a premium for imported product.
“They may not like the price that they have to pay, but that’s the price you pay for waiting, and I think that’s probably what is going to happen this year,” he said.
Crop prices are down, but Kenyon said last year’s large crop depleted soil nutrients.
“You don’t really have to soil test to know that when you remove one-and-a-half times the normal crop, that you probably have depleted the soil of a lot of the nutrients,” he said.
Ken Greer, president of Western Ag Professional Agronomy, said that’s not necessarily true because nitrogen is stored and released every year by organic matter in the soil.
“Anywhere from 10 to 70 pounds of nitrogen can be supplied from the organic matter. It’s totally possible,” he said.
Growers who decide to apply nitrogen will want to keep an eye on U.S. corn planting intentions. At one time analysts were forecasting 90 million acres, down from 95 million acres last year.
It would represent a one million tonne decline in nitrogen fertilizer demand if all the nitrogen applied was urea, said Kenyon.
However, analysts are now suggesting that U.S. growers could plant 93 million acres or more of corn. As well, there could be a fair amount of pent-up demand in the U.S. because many growers didn’t apply fertilizer in the fall due to the late harvest, which could add to the Canadian supply shortage.
Kenyon said an early spring would also exacerbate a supply deficit in Western Canada.
The good news is there is plenty of time to address at least a portion of the growing shortfall, and growers who miss applying nitrogen in the spring can always top-dress the crop when fertilizer supplies are more readily available.
“I don’t think you’re sacrificing a lot of yield for doing that,” said Kenyon.
