Predicting the direction of fertilizer prices in the current economic climate is about as easy as forecasting the weather or knowing how the stock market will respond on any given day. But Dave Heegard, vice president and general manager of LebanonTurf, says if he were betting, he would put his money on prices going up in advance of what he thinks will be very strong spring demand.
“It is impossible to predict with a high degree of confidence right now which direction and to what extent fertilizer prices will fluctuate in the near term,” Heegard said. “That’s because some of the basic laws of supply and demand just don’t seem to apply in this economy.”
For example, Heegard says, “Inventory of raw fertilizer components is increasing, which should drive down prices. But manufacturers (of those same components) are cutting production or shutting down production entirely to reduce supply. That should drive prices up. But dealers, distributors and end-users are holding off purchases because they’re uncertain about the future. You would think that would drive prices down.”
Fertilizer prices rode a global roller coaster for most of 2008. In the spring, golf course superintendents, farmers and other users watched as wholesale prices of anhydrous ammonia, diammonium phosphate and muriate of potash exploded. Industry experts pointed to a “perfect storm” roiled by worldwide energy markets and faltering economies as the levers that pushed fertilizer prices to record levels.
The tide began to turn late in 2008. As prices for corn, soybeans and other commodities declined by as much as 50 percent from their summer highs, and the price of natural gas (which typically accounts for 80 to 90 percent of input costs for anhydrous ammonia) followed suit, wholesale fertilizer prices dropped for the first time in six years, according to the American farm Bureau Federation. Anhydrous ammonia, which had sold for $1,000 to $1,200 per ton, fell into the $500-per-ton range, while urea dropped from $850 to $350 a ton.
Have prices stabilized, or will superintendents and course owner/operators see more volatility?
“If I were betting, I would say that prices have fallen about as low as they will go,” Heegard said. “I think the next move we see prices make will be up, coinciding with what should be a strong spring demand.”
Not only does Heegard think demand will be strong – he also thinks it will be furious.
“The first warm days in March are going to wake up a lot of people to the fact that they need to be feeding their turfgrasses,” he said. “I think that will put a lot of pressure on manufacturers and their distributors to deliver product to their customers, and it could affect the growing season at a lot of golf courses.”
As a precaution, Heegard is encouraging customers not to delay their orders and to be smart about their fertilization decisions.
“Users who are trying to squeeze out the same or better results with shrinking budgets have to prioritize efficiency – products that stay in the root zone longer, so the turf can pick up and use every single penny’s worth of nutrition,” he said.