Fertilizer Price Drop?

A recent drop in the price of urea may foreshadow an extended drop in fertilizer costs according to a Farm Futures report. However, an extended fall in demand would be needed to completely reverse a recent trend of soaring costs, while contradicting factors make predictions difficult. Photo Credits: Santho Pakistan PVT Ltd.

A recent drop in the price of urea may foreshadow an extended drop in fertilizer costs according to a Farm Futures report. However, an extended fall in demand would be needed to completely reverse a recent trend of soaring costs, while contradicting factors make predictions difficult. Photo Credits: Santho Pakistan PVT Ltd.

A report published by Farm Futures revealed a $70 per ton decline in Black Sea urea prices and weakening ammonia costs over the last two weeks of September. Both serve as stand-alone fertilizers and fertilizer mix ingredients. However, prices went from $500 to $550 per ton in the spring to $850 to $900 per ton in September according to a Lebanon Daily News article. An extended drop in demand is needed to reverse this trend.

The reason for the drop and its long-term affects on fertilizer pricing is a debated topic. Zacks Investment Research has identified possible reasons for the drop and several factors that could both increase and decrease costs in the future.

The drop may be the result of landscape professionals delaying purchases in favor of using inventory. However, note that temporary purchasing delays aren’t the extended decrease needed to reverse recent trends. They also claim the ongoing credit crunch is affecting spending with a resulting drop in demand.

According to the same firm rising global food requirements and bio-fuels development have been behind the previous price climbs. These factors have not gone away and increasing prices may re-appear as a result. Also, ongoing strikes at mines for a major Canadian potash manufacturer could have the same effect. LSMP will continue to monitor these factors to assist in estimating future fertilizer costs.

Source: Zacks Investment Research and Lebanon Daily News