Ag Informer – Falling Fertilizer Prices, Slowly

Fertilizer and herbicide prices continue to fall, and there are signs the decline could continue into spring. Now the issue is the number of agricultural retailers sitting on high-priced inputs, which are often passed on to farmers.

A year ago, the headlines were focused on climbing input prices. Not only were farmers looking at a possible shortage of herbicides, there were also concerns about what the fallout from the war in Ukraine could mean for already surging fertilizer prices. In April of 2022, a Farm Journal survey found:

87% of retailers experienced difficulty sourcing inputs for 2022
Of those, 85% had trouble with herbicide availability
38% had difficulty sourcing fertilizer
The biggest issue was securing enough glyphosate, with 100% of respondents reporting issues with that particular chemistry
69% reported difficulty sourcing glufosinate

A year later, the story has dramatically changed. Active ingredients are flowing more freely from China, and declining natural gas prices are leading to less expensive fertilizer.

Sam Taylor, farm inputs analyst at Rabo AgriFinance says there’s been less of a fall on the phosphate side, but it’s still in the double digits. Taylor expects further downside in that market in the coming weeks.

The potash market’s price decline has been more pronounced, with a 20% fall in Midwest potash prices on the retail level, according to Taylor.

With the sudden shift in prices, it creates a difficult scenario for those retailers sitting on fertilizer prices that are at a much higher level than what is posted today.

Taylor thinks there’s been a front-loading of the price decline, with some fertilizer prices looking at a 30% drop since November.

While farmers may be annoyed with the prices they paid in the fall compared to now, some are also getting cheaper price quotes from other retailers just ahead of planting. Taylor says some of those smaller retailers, like co-ops, aren’t structured to assume a 20% to 30% fall in pricing and likely need to pass it on to growers.

As a result, consolidation in the ag retail space, which is already underway, could continue to accelerate in the years ahead.

The latest 2023 outlook from Rabo AgriFinance points out the true test for fertilizer prices is coming, and whether the price pressure will continue when demand emerges. Rabo says once spring fertilizer needs are underway, the question is whether that will then signal a bottom in the markets for nitrogen, but also where the inventory will then be held within the supply chain.

Rabo’s outlook says, “Senses remain that much inventory remains at the product producer level, as retailers and distributors stay reluctant to jump in a falling market.”