Fertilizer producer Mosaic Co. said Dec. 28 it will cut production of phosphate, a key nutrient used for crop production, because prices have fallen to unsustainable levels.
The Minnesota-based company said it would cut its planned production of phosphate by 250,000 tonnes over the next three months, blaming economic uncertainty for a drop in prices. It said it still expected record global demand for fertilizer in 2012.
"The current spot prices in this market do not reflect our outlook for the business, nor do we think they are sustainable," said Jim Prokopanko, Mosaic’s president and CEO.
U.S. phosphate prices have tumbled roughly a quarter to about $460 per tonne in the past month due to a slowdown in global demand, analysts said.
Farmers have been delaying purchases of fertilizer because of a sharp setback in grain prices and concerns that nutrient prices were too high, they said.
Mosaic said global economic woes contributed to the fall.
"As dealers and distributors focus on the macroeconomic uncertainty and delay purchases for the North American spring season, near-term supply of phosphate barges on the Mississippi River has exceeded near-term demand," Prokopanko said.
Farmers are putting off fertilizer purchases because corn prices have pulled back 20 per cent since reaching a record high near $8 a bushel this summer, said David Asbridge, president of NPK Fertilizer Advisory Service, a company that analyzes the fertilizer industry.
Fertilizer dealers also are stepping back from the market because they don’t want to stock up on phosphate when prices are falling.
"Once it started to fall it started to fall pretty quickly," Asbridge said.
Mosaic’s cut in production does not represent a big portion of annual U.S. phosphate production, which is about six million tonnes, Asbridge said. However, it will "help tighten that market up and arrest that decline" in prices, he said.
The cut in production could pinch U.S. farmers who have not yet bought fertilizer ahead of spring planting.
Wendell Shauman, who farms about 1,100 acres of corn and soybeans in Illinois, uses phosphate in his fields and said he didn’t think prices were so low.
He already applied fertilizer to his fields in the fall and plans to add a little more in the spring.
"We’ve had nice price increases for our grain the last couple years," he said. "It seems like whenever our income goes up, those that sell to us want their income to go up, too."