As you’ve fine-tuned your operation, you’ve put a significant amount of time and research into learning the ropes of the commodity markets, taking advantage of options and futures to get the most for your crop.
What if you could do the same with your fertilizer needs? Josh Linville, vice president of fertilizer at StoneX, says the fertilizer marketplace might be on the path to increasing accessibility to farmers and opening up the way you approach marketing.
“Most traders use NOLA, and they trade barges, so the gold standard is 1,500 per ton futures because that links directly with 1,500 ton on a barge,” Linville says. “When you ask farmers what they’re looking for, they want to trade maybe 25 or 50 ton. That’s really hard in a market that trades primarily 1,500-ton blocks.”
Even for the farmers who could find a use for 1,500-ton of fertilizer, they likely aren’t wanting to purchase all of it in one go.
“The market isn’t supposed to be set up to do your entire yearly need in one trade,” Linville says. “We’d like to eventually get to be like the grain markets where you have corn and then you have corn minis.”
There’s growing interest for reducing fertilizer trade limits.
“People are starting to understand if we want this market to truly grow, we need another layer of liquidity; the farmer and the retailer represent that,” he says. “There’s been conversation to get down to 25-ton contracts and get to where we’re doing 50-ton blocks.”
A Slow-Moving Process
Linville notes there are multiple regulatory bodies involved. Even after approvals are reached and if there’s enough of a market willing to trade lower volumes, open interest will be another factor in the timeline.
“I highly doubt they’d make changes to a month that already has open interest,” he says. “So, let’s just say that all of a sudden, nothing else traded further out for April or beyond. This is all speculation on my part, but that would probably be April 1 at the earliest for NOLA Urea. Nola DAP currently has open interest through December, so January would be the earliest. Same for UAN.”
With a change like this, there will likely be growing pains.
“Don’t expect this is going to be exactly like the corn market; you might sit on some bids or offers for quite a while,” Linville says. “When you look at the size of fertilizer globally, the number of tons traded and the number of hands that it touches, it can be a massively huge market, eventually, but not today.”
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