Fertilizer costs have come down from last year’s heart-stopping prices, but don’t expect prices to stay down. Price volatility should continue through 2009 and the near future, according to a fertilizer industry spokesperson.
While energy costs are down from last year, the world’s population keeps growing, global food stocks remain low, and the U.S. dollar is still weak against other currencies—all factors that led to the perfect storm of fertilizer costs in 2008, said Robert Mikkelsen, western regional director for the International Plant Nutrition Institute.
The price spike that occurred last year was a result of high demand for food, feed, fiber, and fuel all at the same time, he explained, adding that corn grown for ethanol definitely had an impact. About a quarter of the U.S. corn crop is now being grown for ethanol, a number that will increase to 35 percent in a decade if the mandates of the 2007 Energy Bill stick.
"Unless the new Congress amends the energy law, we haven’t come to the plateau in biofuels yet," Mikkelsen said.
Corn, wheat, and rice use almost half of the world’s fertilizer production, compared to 15 percent used by fruits and vegetables. With more corn being grown, there is less fertilizer left over for other crops to use, he explained. Corn is the largest user of fertilizer in North America.
But don’t just blame corn for the spike in fertilizer prices. Each year, there are more than 70 million new mouths in the world to feed, with the world demand for food expected to double by 2050, he said. "That’s like adding a new country the size of Germany or Egypt each year."
China, a country that now uses 40 percent of the world’s fertilizer production, plays a significant part in the rising demand for fertilizer. Chinese farmers are tilling more land and growing more food. Moreover, Chinese are eating a more protein-laced diet. Within one generation, today’s average Chinese ten-year-old boy is now four inches taller than his parents and grandparents, Mikkelsen said.
"And with food reserves at an all-time low, we’re eating more than we’re growing," he added. "Fertilizer prices tend to follow the commodity prices of grains. When those prices are high, we all pay more for fertilizer."
The strength or weakness of the dollar also plays a role because much of the ammonia (nitrogen) and nearly all of the potash is imported into the United States.
"Fertilizer prices are down now, but when you look at the other factors that contribute to pricing, it won’t stay down," he summarized.
Outlook for 2009
Mikkelsen pointed out that last summer, financial wizards were convinced that gasoline would reach $5 a gallon by Christmas. "All the experts were wrong… I sure can’t tell you what’s going to happen to fertilizer prices this year."
The price of natural gas, which is used to make ammonia, has gone up and down; sulfur, which was over $100 per ton last year, is now being stockpiled because prices are so low. "Many prices declined as fast as they increased," he said.
Organic composts and fertilizers were not necessarily cheaper than synthetic fertilizer sources last year, he pointed out. Most nutrients in manure come from fertilized crops, he said, noting that the price of manure and compost tend to follow other fertilizer prices.
So, what is a grower to do in light of volatile and high fertilizer prices?
Trying to time purchases when fertilizer prices are low is about as easy as playing the stock market, he quipped. "It’s really about just following good horticultural practices. Balanced fertility is still a good investment."
Question past practices
Mikkelsen, who spoke during a fertilizer session at the Washington Assocation of Wine Grape Growers convention in February, quoted J.P. Getty in saying, "In times of rapid change, experience can be your worst enemy." He used the quote to illustrate the need for growers to look at their nutrition programs with new eyes. "Times are different now. Don’t just do what you’ve always done."
Mikkelsen advised growers to make nutrient decisions based on measurements. Take soil and plant tissue samples and know the trends of your nutrient levels. Know if your plant levels are in the low, medium, or high ranges and choose nutrient treatments that will result in a plant response. Adding a foliar treatment to raise the level of a nutrient in a low range is more economical than spending money on a nutrient that is already in the medium or high range.
Some growers have thought about skipping an application of nitrogen or cutting back on potash or phosphate for a season to save money. But he countered that such a move is like taking the spark plugs out of an expensive sports car so you can save money on gasoline. "It may still run but not at maximum performance."
Mikkelsen suggested that growers be site specific when they make nutrient applications. Broadcasting fertilizer down a vine or tree row and then using drip irrigation may not be the most effective way to get the right nutrient to the right place.
"Question what you do, why and when you’re doing it," he said, concluding that fertilizer decisions should be based on measurements and not past practices.