Monday, December 27, 2010

Fertilizer Marketing

I have been in the ag business for 34 years and every year I have to question the logic of fertilizer marketing. I am not talking about the local dealers who supply the end user—farmers. I am talking about the fertilizer manufacturers who make the products that dealers buy.

When I started in 1976, there were at least 12 fertilizer manufacturers in the US. Today there are 11 in North America and five in the U.S. These people control the lives and futures of everyone from the dealers to the growers. Believe me when I say manufacturers do not lose money. They may make more or less from year to year but they will not lose. Whatever expenses they generate will be covered by the price of their products. Dealers do not have it quite as good. The idea of market pressure is very strong when you are a retailer. Growers certainly do have loyalty to specific dealers but their pockets are only so deep. If the price is too high the growers will just cut back or go somewhere else to buy.

I bring this up because 2011 is going to have some very strong pricing for nitrogen, phosphorous, and potassium. As I see it, there are too main reasons for this. First, commodity prices (wheat, corn, soybeans) are up and when they are up, the general idea is that growers can afford more nutrients so the price goes up. Second, is some information I saw from a magazine article stating that the International Fertilizer Association (IFA) estimates that the entire fertilizer industry has spent over 40 billion dollars in upgrades on their nitrogen, phosphorous, and potassium plants both internationally and in the U.S. I think it’s a safe bet they want some of that investment back as soon as possible.

It is unfortunate that this pricing strategy has to come down on the backs of the farmers. I have never seen a situation where a farmer can raise the price of his crop to offset rising input costs. It just doesn’t work that way in the real world.

My advice is twofold; first don’t shoot your fertilizer dealer when the 2011 prices come out. Second, make wise choices on what fertilizer you need and how to use it to its maximum ability.

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