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Articles from 2007 In December


Mystery surrounds •world demand' for fertilizer

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Anger. I can hear it in the phone calls and read it in the emails. Farmers are getting downright ticked off at the stories they are hearing from fertilizer dealers as spring planting approaches.

They're hearing fertilizer dealers say they can't take their money because they're not sure they will have anhydrous ammonia available in a few months. Or, they're telling farmers they will have it, but the price will be $650 per ton — and up. That's about $100 to $150 per ton higher than spring 2007.

In our investigations here at Farm Futures (see our series at www.farmfutures.com), we've been told by nearly every source that the cause of higher prices is higher world demand. That because corn futures are over $4 per bushel, more people are planting corn and so they need more nitrogen fertilizers. Or, they can afford to pay more for nitrogen fertilizers.

Put another way, China, India and Brazil are improving their diets and want more protein — so those countries need more corn to fatten livestock.

So someone somewhere is growing additional crops. But who?

That's where the 'world demand' argument begins to get thin.

"The common theme for defending high prices has been high demand, but there is precious little proof of how much higher that demand is,•bCrLf says Brian King, who farms near Marion, Ind., "especially given that the huge increase in corn acres that occurred in 2007 will not be repeated in '08. 

"Since the U.S. grows approximately 40% of the world's corn, are there numbers to support the claim that world wide demand for ag-related nitrogen has increased enough to justify $800/ton NH3? From what I know, there has not been an increase in acres worldwide, so where is the demand coming from?•bCrLf

These are legitimate questions. Cropping practices in major ag producing areas have not changed, at least not enough to warrant this claimed increased demand. 

Fertilizer companies explain this higher demand by talking about higher commodity prices and changing global diets. As economies in developing countries improve, so do the diets of the people who live there.  Meat consumption is growing. This results in a gradual shift away from rice and wheat to coarse grains and oilseeds for animal feed and biofuels.

According to USDA, grain consumption is now rising at close to 2% each year, compared to the historical rate of 1.2% per year. More importantly, grain consumption has outstripped production in seven of the last eight years.

The theory behind this higher world demand is that, lured by higher commodity prices, farmers everywhere will plant more crops and use higher rates of fertilizer to get better yields.

Meanwhile, fertilizer companies continue to make record profits. Third quarter 2007 net sales at CF Industries, a major U.S. nitrogen and phosphate producer, rose to $582.9 million, up 46 percent from 2006 third quarter.  The Belarusian Potash Company, the world's leading exporter of potash fertilizers out of Belarus and Russia, is also making record profits on ever-higher prices. It now controls 34 % of the world's total export market for potash.

You can't grow crops without fertilizer.  Are these fertilizer companies becoming the new Big Oil, with a growing monopoly on a key resource we all need for living?

My theory is a little more simple than the 'world demand' story. Input companies see those $4 corn prices and have determined that you can afford to pay higher prices for fertilizer. Both dealers and producers are getting a bigger cut of your pie. 

Let us know what you think. You can enter a comment below just by clicking on "anonymous" and giving us your feedback. How are prices where you live? What are you hearing from your dealers?

Success Brings Criticism; Maybe Opportunity

Record demand, production and prices were the story for the corn industry in 2007. The success seen raised a lot of questions about corn's impact on consumer prices.

Rick Tolman, CEO of the National Corn Growers Association, says the criticism may be a blessing in disguise giving folks a chance to see the real story and the great success and how exciting things are in agriculture.

"I don't think the people on Wall Street or on the west coast understand how much technology is being applied and how much change there has been in how we grow crops in the last five years," Tolman says. "I think that story is going to come out and we are going to get a wave of recognition and support for agriculture."

Less Corn; More Beans in 2008

Soybean prices are the highest they've been in the last 35 years, and the soybean-corn price ratio has gone up sharply from last spring when farmers were making planting decisions. Because of that, USDA Chief Economist Keith Collins says they expect a shift of acres from corn to soybeans.

"We planted nearly 64 million acres of soybeans in 2007," Collins says. "We think we could be in the neighborhood of 70 million acres of soybeans in 2008."

Collins says the worldwide demand for soybeans, oil and meal is so strong that the increased production will not send prices down; rather sales will increase, stocks will stay at very low levels meaning very strong prices for 2008 crop soybeans.

Biodiesel Blending Begins in Brazil

Starting on Jan. 1, all diesel fuel in Brazil must be a 2% blend of biodiesel. According to Brazil's interim minister of Mines and Energy Nelson Hubner, the country's production capacity for biodiesel is more than three times the amount needed to meet the requirement.

According to Hubner, about $511 million in diesel fuel imports will be saved due to the mandate. Nearly all of Brazil's biodiesel is produced from soy oil, although they are trying to switch to a non-commodity source. The country is also looking at pushing up a mandate for a 5% blend to 2010.

Corn Industry Success

Record demand, production and prices were the story for the corn industry in 2007. The success seen raised a lot of questions about corn's impact on consumer prices.

Rick Tolman, CEO of the National Corn Growers Association, says the criticism may be a blessing in disguise giving folks a chance to see the real story and the great success and how exciting things are in agriculture.

"I don't think the people on Wall Street or on the west coast understand how much technology is being applied and how much change there has been in how we grow crops in the last five years," Tolman says. "I think that story is going to come out and we are going to get a wave of recognition and support for agriculture."

Higher Soybean Acreage in 2008

Soybean prices are the highest they've been in the last 35 years, and the soybean-corn price ratio has gone up sharply from last spring when farmers were making planting decisions. Because of that, USDA Chief Economist Keith Collins says they expect a shift of acres from corn to soybeans.

"We planted nearly 64 million acres of soybeans in 2007," Collins says. "We think we could be in the neighborhood of 70 million acres of soybeans in 2008."

Collins says the worldwide demand for soybeans, oil and meal is so strong that the increased production will not send prices down; rather sales will increase, stocks will stay at very low levels meaning very strong prices for 2008 crop soybeans.

Brazil Biodiesel Mandate

Starting on Jan. 1, all diesel fuel in Brazil must be a 2% blend of biodiesel. According to Brazil's interim minister of Mines and Energy Nelson Hubner, the country's production capacity for biodiesel is more than three times the amount needed to meet the requirement.

According to Hubner, about $511 million in diesel fuel imports will be saved due to the mandate. Nearly all of Brazil's biodiesel is produced from soy oil, although they are trying to switch to a non-commodity source. The country is also looking at pushing up a mandate for a 5% blend to 2010.

Stay on Track with Soil Tests

With fertilizer prices continuing to climb, the value of knowing what nutrients
are needed and in what amounts is more important than ever. Even if you don't follow an intensive, GPS-based soil sampling routine, a good soil test helps you get the most bang for your fertilizer bucks.

Wayne Flanary, University of Missouri Extension agronomy specialist, reminds growers to follow these good techniques when gathering soil samples.

*Use a soil probe to collect cores. Your fertilizer supplier or MU Extension office may have one of these tools available for your use.
*Combine these cores to make a composite sample that represents a particular field, depending on its size. A composite sample should represent no more than 20 acres.
*When sampling, divide fields into areas that yield differently. For example, sample hillsides as one sample and creek bottom as another. Look at the field and draw a map so you can track what each sample represents.

*Another goal of soil testing may be to identify a problem area within a field. Instead of composite samples, take a sample of the problem area and a sample of the good area of the field. Then study the contrast between the two to decide if it is deficient in nutrients, or has other limiting factors.

Pasture fertilization

Many farmers and ranchers make the mistake of applying nitrogen to grass pastures without knowing the pasture's phosphate and potassium nutrient levels.

"Cool-season grass yields are maximized at lower phosphate and potassium levels than that of row crops," notes Shawn Deering, MU Extension livestock specialist. "However, to assess this we need to soil test the pasture. Phosphate and potassium levels will be high around trees where [livestock] stand, where they feed and also where they drink."

To get a sample that best represents the area, do not obtain soil cores from these areas, Deering advises. "Sample the pasture taking random cores as you walk through the field. It is best to use a soil probe so you can obtain cores easily. Be sure to take samples at the correct depth of 7 inches. Take lots of cores that can be mixed together to obtain a good composite sample that represents the area you are sampling."

When submitting a sample, indicate whether the field is for grazing or haying so that a specific fertility recommendation can be made based on the soil test analysis.

Flood-Dampened Hay Poses Serious Fire Threat

Stored hay dampened by flooding in southwestern Washington poses a serious risk for spontaneous combustion, according to two Washington State University experts..

Moisture both reduces the hay's quality and can create microbial growth and chemical reactions that could result in fire, according to WSU associate crop scientist Steve Fransen and Skagit County Extension Educator Ned Zaugg.

The two have authored an informational paper on the risk, describing how to test for signs of spontaneous combustion and what to do about it.

The Washington State Department of Agriculture is distributing the paper to farmers and ranchers in flood areas. The information is also available on the WSU Extension Web site: ext.wsu.edu.  

Wet hay stimulates microbial growth that produces heat. The heat in turn dries out the surrounding hay surfaces, stimulating more microbial growth. Various types of microbes live and die as the internal bale temperatures climbs.

"Once the bale temperature reaches about 150 degrees Fahrenheit, the hay is on a one-way street going in the wrong direction," says Fransen. "Above that temperature more heat-resistant bacteria start chemical changes that rapidly increase the temperatures to the point of spontaneous combustion. When the bale temperature gets to 150 to 160 degrees, it's time to take immediate action.'

Farmers are urged to watch for early warning signs.

"Watch for steam rising from bale surfaces," says Zaugg. "You may see molds starting to grow on those surfaces. There will also be an acrid hot tobacco odor from the bales."

Homeland Security Chemical Guidelines May Affect Colorado Ag Facilities

The Colorado Department of Agriculture is urging state farm producers to assess their stored chemicals under new federal Department of Homeland Security rules.

DHS issued Chemical Facility Anti-Terrorism Standards for any facility that manufactures, uses, stores or distributes certain chemicals, including agricultural fertilizers and certain fumigants, above a specific quantity.

The DHS final rule on CFATS, including the final list of chemicals covered, was published in the Federal Register recently. The final list of chemicals, referred to as Appendix A, includes about 300 products of interest and includes common industrial chemicals such as chlorine, propane and anhydrous ammonia.

"Appendix A lists chemicals that can be found in fertilizers and pesticides," says Colorado Commissioner of Agriculture John R. Stulp. "I encourage all ag producers who store chemicals to check the entire list to make sure they are compliant with the federal regulations."

A few of the pesticide chemicals listed in Appendix A include the fumigants aluminum phosphide and phosphine and plant growth regulators ethylene and ethylene oxide; those chemicals found in fertilizers include ammonium nitrate and potassium nitrate.

Facilities that process chemicals of interest at or above the screening threshold quantities are required to complete the Top-Screen assessment by Jan. 21, 2008, or within 60 calendar days of receiving the chemical. Once a facility fills out the assessment, DHS will decide whether the chemical poses enough of a terrorist threat that the facility's security measures should be regulated.

Failure to comply with the regulation could result in a civil penalty of up to $25,000 per day or a closing order to the facility.

For more information on the DHS standards, including a complete list of chemicals of interest, visit www.dhs.gov/chemicalsecurity. Producers with questions may call (866) 323-2957.