retailers and manufacturers of fertilizer. There is supply in place, but relatively little current demand.
Over the next 90 days, we believe this situation will reverse itself, and this presents the problem.
The next 90 days
Having stayed on the sidelines through this volatile period, farmers will likely decide they need their fertilizer for spring needs now. Retail inventories will empty quickly, and then retailers and farmers will look to manufacturers to provide additional supply.
That won’t be easy. Since farmers largely stopped buying fertilizer this fall, many manufacturers had no choice but to cut production. This has occurred globally. On a worldwide basis, 10 to 20 per cent of urea production capacity has been shut down or curtailed since the fall. About 40 per cent of ammonia production, 30 to 40 per cent of phosphate production and 30 per cent of potash production have been shut down or curtailed.
Read Also
Editor’s Note: No pressure
What is your playbook going into this year’s crop? Not an easy question to answer right now, given the global…
The first wave of 2009 fertilizer demand will be satisfied by inventory in storage and product currently being manufactured. The challenge will come if a second wave of fertilizer demand occurs, and there is less available than needed.
We believe, therefore, there may be a significant problem looming between mid-March and the end of April. We at Agrium will work diligently to manufacture product and transport it where it’s needed this spring.
To some extent, we are in uncharted territory here and no one knows precisely what the demand for fertilizer will be. We do know this: the sooner we can resolve the 2008 inventory issue, the faster new product can replace it and the better farmers 2009 production needs will be met.
It is for individual producers to assess what is most important to them at this stage, and whether supply assurance is of greater value at this moment than price assurance.
Many Canadian farmers have developed close working relationships with their retailers. To help ensure they have the fertilizer they need, when they need it this spring, producers might be well served by sitting down with their retailer, soon, to discuss how those needs can be met.
