Despite strong skepticism by fertilizer execs, farmers aren't buying their arrogant pricing or their products either. Taking ammonia for one example: [from The Market - an excellent source for fertilizer information.]
The weakness in demand has forced the shutdown of two plants operated by Agrium and Mosaic, but a third plant operated by Terra Industries in Donaldsonville is defying market predictions by staying open.
Agrium's 280,000 tonne/year Redwater 1 unit in Canada's Alberta province is considered a swing plant. Agrium will not bring the plant back up until there is a market rebound. A second Agrium unit at Redwater has a capacity of 680,000 tonnes/year and is still in operation.
Mosaic's Faustina plant in Louisiana has been down for two weeks. The plant has a capacity of 510,000 tonnes/year of ammonia.
A steep fall in industrial demand for ammonia is contributing to negative sentiment. Ammonia is used as an intermediate in the production of nylons, acrylonitrile for fibres and plastics, isocyanates for polyurethanes, hydrazine and explosives. This means ammonia is partly exposed to the steep decline in the US housing and construction, automobile, pulp and paper industries, via a range of chemicals including caprolactam, nylon, melamine, and
acrylonitrile-butadiene-styrene. One bright spot is the mining sector demand for explosives, which is said to be holding up reasonably well among coal producers in particular, as a peak production season begins.
Even more stunning is the outlook for phosphate products.The phosphates market remains in search of a price floor. All major exporters have significantly curtailed production in the face of virtually non-existent demand globally.
These comments tie to a website for the fertilizer retailing industry, and it appears all is not well among the ranks. Here's one dealer comment:
Q: “…what is the mood of the Ag-retailer going into deeper and perhaps uncharted water?”
Does the seed industry honestly think they can shrug off deflationary pressures in their corner of ag? Probably, given the fanatical mindset of absolute certainty in their business plans, but color me doubtful. Seed price too will come under even more intense pressure, and just as I'm trying to figure out how to grow corn for $3, they will be struggling to learn to sell seed for $150. That's my guess.
Watching soy prices fade rapidly, one has to wonder if the repeatedly-forecast "bidding for acres" has become a Dutch auction.
Hog & Corn Comments - 12-03-08 - Pork cutout comes in $1.32 higher!
It's a new world for fertilizer, too...