Editor's Note: In a new, ongoing series Farm Futures is taking a more in-depth look at key input prices for the 2008 crop year. While higher crop prices have been good news on the farm, there's a bad-news scenario building for fertilizer costs. In this installment, we look at how equipment shortages may impact supply for the new crop season.
Midwest farmers are complaining that fertilizer dealers, worried about supply, won't even quote a price for spring-delivered anhydrous. At least one
"For the barge river market, equipment is just not available," says Stephen Johnson, Sales Lead at Miles Farm Supply, Owensboro, KY. "There may be enough barges but not enough to get here in time to supply every one with ammonia because they have taken some barges out of production in the last year."
Miles buys anhydrous from both domestic and foreign sources.
"The other thing I've heard is that because Iowa and Illinois farmers put on so much ammonia this fall, it has really depleted supplies the further north you go," says Johnson.
According to reports coming out of Iowa, fertilizer dealers report strong demand for fall anhydrous, up significantly from previous years. Pre-paid and cash and carry fall anhydrous supplies are gone for all practical purposes. Additional product for this fall is limited with spot prices in excess of $600 per ton reported.
Johnson says he has been trying for three weeks for prepay spring ammonia and suppliers will not quote any new business. "They say they don't have anything available or they have already taken prepay earlier and they don't have the tons right now, or the means to get it into place by spring," he adds.
Johnson says CF Industries, a major domestic anhydrous fertilizer maker, has been reporting since October that it is completely sold out until February. CF Industries reported record profits in 2007. Phone calls to CF Industries were not returned.
Johnson is still confident his dealership will have anhydrous to sell at the farm level, but Miles does not take orders for spring until mid to late December. "We will have a supply of ammonia," he says. But expect to pay much more per ton for 2008 delivery.
"You're probably looking at $100 per ton ($640 compared to $540 last spring) higher," says Johnson. "It could go higher. We're going to make typically the same margins we always make. The increase in price is coming from the ammonia producer."
Transporting anhydrous ammonia
How is anhydrous transported? The Fertilizer Institute used 2005 data to come up with the following:
- About 52,116 rail shipments delivered approximately 4.2 million tons
- truck cargo tanks carried approximately 4 million tons on the nation's highways
Approximately 3.7 million tons moved via pipeline; There are only two
ammonia pipelines, from U.S. to Texas and the other from Minnesota to Louisiana and Nebraska Indiana
- Approximately 0.9 million tons of anhydrous ammonia moved by barge.