How sticky are fertilizer prices?

Skimping on fertilizer is a dangerous game as farmers face critical financial decisions in the coming months.

September 23, 2024

Fertilizer prices tend to ebb and flow throughout the year, as the delicate global balance between supply and demand tilts to favor one side and then the other.

For prices, that typically generates a “spring bounce” when farmers are actively buying, followed by a “summer slide,” when prices drop with less demand, according to Mark Milam, senior editor of fertilizers for Independent Commodity Intelligence Services, or ICIS.

That slide, however, stalled this year. As of mid-August, fertilizer prices were still stubbornly high, denying farmers any sort of reprieve from high production costs.

Domestic and international factors — including stalled production in Egypt and China’s decided lack of export market activity — supported higher-than-normal summer fertilizer prices.

Lackluster U.S. demand this year also plays a role.

“While supply is tight, the demand is not there,” Milam says.

“Typically, in the summer, farmers like to refill or restock their supplies for fall applications. But in areas where yield potential is lower, we are starting a cycle of farmer hesitation, where they choose to wait and see what happens until next spring.”

The environment creates plenty of critical financial decisions for farmers to make in the coming months. Some were able to build up working capital over the past few years, a feat that is unlikely to be repeated in 2024 and 2025. This is especially so for those who burned through that liquidity by making infrastructure improvements or updating equipment in the past year or two.

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Ways to balance the budget abound. Dialing back family living expenses and delaying additional equipment purchases are two solid options.

Skimping on fertilizer applications is a much more dangerous game. There’s a possibility to lower your NPK rates in 2025, but you definitely need to conduct soil tests before confidently making that decision. Your current inventory can help drive decisions moving forward, Milam says.

“If I was in this position right now, I would look at my inventory on hand and try to determine if I had enough to undertake fall applications,” he says. “If I decide that I’m not going to make a fall application, I might hang on to what I have to get started and take the chance to see what direction prices make into the winter months.

“This is a year where being a little flexible will help you get into a better position.”

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