Finessing a Fertilizer Deal
Feb 15, 2009 12:00 PM, From Guest Editor John Russnogle
“What We've got here is a failure to communicate.” It's a famous line from the 1967 movie classic Cool Hand Luke that starred Paul Newman. It's also a fitting theme for what's been happening in the crop input side of agriculture since last summer.
Fertilizer prices hit new highs as a number of market forces aligned and caused an artificial spike. With corn and soybean prices also setting price records, many dealers filled their fertilizer barns in anticipation of a normal fall market, without any commitments from farmers. When the bottom fell out of the market, they found themselves with a high-priced product that their customers say they can't afford.
It's a standoff now between dealers and farmers that likely will continue until fields thaw and decisions can't be delayed any longer. Some retailers won't survive and, ironically, because the fertilizer supply chain has been paralyzed since last fall, there will be some localized shortages this spring.
Retailers are going to make sure this financial beating doesn't happen to them again. Input suppliers will be talking more with farmers to make contractual agreements in order to assure supply.
That means you'd better talk to your grain broker at the same time. If you're locking in input costs, you need to offset that commitment with grain sales. It will take considerable communication. But failure to communicate, whether in movies or in the crop input industry, can become failure to survive.
John Russnogle, a contributing editor for Farm Industry News, has covered agriculture for more than 30 years.
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