Fertilizer is increasingly being sold in spot deals rather than long-term contracts as buyers prefer to play safe while the global economic outlook remains uncertain, the chief executive of Mosaic Co. said Jan. 14.
“It’s effectively becoming a spot market,” said CEO Jim Prokopanko of the leading global producer of concentrated phosphate and potash crop nutrients, which is majority owned by the private food giant Cargill Inc.
“We’re prepared to sell that way. But if it’s a spot market, it’s definitely going to be a different price” than a long-term contract, he told Reuters in an interview at Mosaic’s “Ag College” in Orlando this past week to educate customers about trends for 2010.
Spot – or short-term – prices can fluctuate wildly depending on many factors, while contracts give buyers long-term assurance their costs will remain the same.
The trend toward spot markets doesn’t seem to worry Prokopanko, as spot prices tend to be higher than long-term contract prices and demand is always there.
“They’ve got a planting season come,” he said. “They have limited available supplies.”