What’s going on with the fertilizer market?
I think we can agree that 2021 hasn’t been a typical year. The unusual amount of turmoil on the supply side of the industry has been anything but normal. The fertilizer market, specifically, has been especially problematic, as we’ve all seen a steady increase of fertilizer prices since the beginning of the year with no real signs that it will be retreating anytime soon.
In short, the availability and affordability of your typical fertilizer products is highly suspect right now.
Let’s dive into what’s actually happened this year, so far, so we all understand why we’re all in this situation.
Urea Nitrogen
The largest component used in all T&O fertilizers is urea. It’s largely an imported commodity that is shipped into NOLA (New Orleans, Louisiana) in massive ships. The largest exporters are India and China, both of which aren’t always the best communicators in terms of what they have available and what they’re intending to ship out. Generally speaking, we are at the mercy of how much urea is brought into the country. But that’s only the first part of our current problem.
The much larger factor that directly impacts the urea prices is the demand from the ag industry; more specifically, how many acres of corn that is planted and what the bushel price is. When the corn prices are high, farmers can afford to apply urea to increase yields and they snatch up the available urea imports due to the insanely large quantities they purchase at one time. By comparison, our little T&O industry isn’t much of a match in terms of buying power.
Currently, corn prices are exceptionally high as compared to other years. Last month corn hit $7.73 per bushel. Last May, the price was $3.11. This translates into the ag industry eating up all the supply that would typically filter down to us. In a nutshell, that’s why you’re paying more for fertilizer than last year.
Muriate of Potash (MOP)
Potassium chloride or muriate of potash (MOP) is a mined mineral that is found in ancient, dried lake deposits and a component in most standard sized fertilizer products. Mosaic Company is one of the leading producers of concentrated phosphate and potash crop nutrients due to having one of the world’s best ore deposits located in Esterhazy, Canada. In fact, it’s the largest potash production facility in the world. This is very likely where all the MOP you apply is coming from.
In early June, Mosaic was abruptly forced to close their two primary mine shafts (K1 and K2) due to an unexpected acceleration of brine inflows, which is a mix of heavily saturated NaCl and water. Brine inflows are a natural part of the mining process and can be managed when levels can be successfully pumped out. Recently, however, these inflows have increased to such a degree that floods risks endanger the safety of the workers. Which is why the mines have temporary closed.
These closures directly impacted the availability of MOP which sent the potash market pricing into overdrive. Mosaic is predicting a loss of approximately 1 million tons of potash that will not be produced during this unexpected shutdown.
Our industry will feel the impact of this reduced availability by experiencing higher than normal MOP costs for our fertilizer products. If this outage persists, there may be a time where it will become necessary to temporarily substitute ag grade MOP (SGN 300) to continue producing products.
Sulfate of Potash (SOP)
And to complete the trifecta of bad fertilizer component news, sulfate of potash (SOP) is also experiencing lower than normal available levels; particularly the greens grade (SGN 100) and the mini-sized (SGN 150). While available in greens grade, mini-sized and standard sized, the golf and sports turf industries primarily utilize the smaller sizes for the shorter maintained, high value turf due to the significantly less burn potential than MOP.
One of the leading and very limited suppliers of small sized SOP to our industry experienced some undisclosed production issues which dropped their production rates to less than five tons per day. The entire fertilizer manufacturing industry had all their orders initially pushed back to November (at the earliest), causing an immediate shock through the industry.
Again, short supply of an important raw material component has driven up the costs of the limited on-hand supply.
Outlook
The good news is that we’ve been here before. Market volatility has always and will always impact costs for the both of us. Clearly, we all have some issues to work through when it comes to managing fertilizer costs without breaking the bank…manufacturers and end users alike. With a mutual understanding of these issues, we can move forward together with as little interruption as possible to the quality of fertilizer products and the quality of turf it is applied to. We’ve done it before…we’ll do it again.