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Dealers Forced To Be Flexible On Fertilizer Prices: Analyst

For farmers seeking relief from high fertilizer prices this spring, David Asbridge has two words of advice: shop around.

Good deals on fertilizer can be found because dealers have excess supplies and are desperate to unload them, Asbridge told the annual GrainWorld conference in Winnipeg.

But he warned farmers not to delay too much because supplies could suddenly become tight again.

“Don’t put it off too long,” Asbridge, a senior economist with Doane Advisory Services in St. Louis, Missouri, said after speaking to the outlook conference sponsored by the Canadian Wheat Board.

“Shop around, get the best deal you can, but don’t put it off too long, or you could be the guy who goes in to buy urea and the guy goes, I’m sorry, I’m booked.”

Asbridge said some U. S. farm co-operatives are currently reporting price savings of U. S. $150 to U. S. $200 a ton on urea nitrogen from dealers within a 150-mile radius.

Fertilizer prices, which peaked at record highs last summer, may now be working in farmers’ favour, following a price collapse which paralleled the stock market crash in the fall.

Dealers who bought fertilizer supplies at the peak of the market are unable to sell at those prices because the going rates now are much lower, said Asbridge.

That means they will have to lower prices to move their stocks, he said. “In some instances, the dealers will have to sell below what it cost to put them in.”

Another reason for high in-storage stocks is that cool, wet fall weather in parts of the North American grain belt kept farmers from applying fertilizer before winter set in, said Asbridge.

But dealers don’t deserve too much sympathy because they made money the year before by buying fertilizer when prices were still on the upswing and selling even higher, he said.

“This year we have told fertilizer dealers they’re probably going to have to give up some of what they made last year.” Asbridge said he couldn’t tell farmers how long to wait before buying fertilizer this spring.

“Shop around, get the best deal you can, but don’t put it off too long.”

– david asbridge

That depends on the individual producer, he said.

But he remarked that all major fertilizer manufacturers have announced across-the-board cutbacks in capacity utilization for nitrogen, phosphorus and potassium.

In his presentation, Asbridge cited several reasons for a “significant” tightening in world fertilizer supplies: strong worldwide growth in demand, a sharp reduction in capacity between 2002 and 2006 (especially in the U. S.), escalating natural gas prices, record-high freight rates and a low U. S. dollar.

Growth in world fertilizer demand soared between 2000 and 2006, propelled by major increases in China and India.

But the sudden economic collapse in late 2008 helped lower fertilizer demand. In the U. S., combined demand for nitrogen, phosphorus and potassium fertilizer (N, P, K) in 2009 is expected to fall by 5.8 per cent, said Asbridge. [email protected]

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