Fed up with the high cost of fertilizer and the refusal of Canadian companies to provide any kind of financial break, producers and producer groups have taken it upon themselves to seek out cheaper alternatives, including importing products from the U. S. and overseas, industry sources say.
“There have already been a number of producer groups and some private individuals who have successfully and unsuccessfully sought out cheaper foreign fertilizer to offset the high-priced Canadian product,” said Ian Wishart, president of the Manitoba-based Keystone Agricultural Producers, or KAP, said.
He said fertilizer manufacturers in Canada seem to have more of an eye on their share values as opposed to paying attention to the fertilizer supply-demand situation.
“There is lot of high-priced fertilizers in storage at retail outlets in Western Canada which producers are absolutely refusing to pay up for,” Wishart said. “As a result, these companies have been able to keep their share values up but at the expense of their fertilizer sales….which is not a good market response but rather wishful thinking.”
Producers in Canada have indeed been backing away from making any fall fertilizer purchases, Mike Jubinville, an analyst with the farmer advisory service, ProFarmer Canada said.
“Nobody at this time wants to take a chance on fertilizer even though the risk of higher prices is still there,” he said.
Jubinville felt that fertilizer prices are still astronomically high, but they have begun to roll over somewhat.
“To a certain extent there has been some sort of demand destruction in the Canadian fertilizer sector because of the high prices,” he said.
Wishart said the fact prices for a number of commodities, particularly canola which is a high-input crop to grow, have declined significantly were also a factor in the refusal to buy these products.
The cash price for canola has now dropped below $8 a bushel in Western Canada, the value which is considered a break-even point for producers, Wishart pointed out.
A Canadian-based producer group called Farmers for North America, or FNA, has been one of the more successful groups who have been able to bring in cheaper-priced fertilizers from outside of Canada.
“The importance of importing fertilizer from outside of Canada is to offer a competitive product and lower the price paid by producers,” Glenn Caleval, an executive consultant and official spokesman for FNA, said.
The FNA is an organization which has 8,000 members across Canada. There are also a handful of U. S. producers included in the membership.
Caleval said Canadian producers are tired of seeing Canadian fertilizer companies report record earnings at their expense, especially while there is cheap product available in the U. S. and offshore.
“These companies are not even shy about not offering any kind of better price to producers at present…they just want to maximize whatever profit they can,” Caleval said.
He said his group currently imports three kinds of fertilizers for its members.
The fertilizers are brought in through the ports of Montreal, Vancouver and Churchill.
Caleval was reluctant to indicate just how much cheaper their fertilizer imports were, but indicated that three years ago when the group first brought product in, the price delivered to the producer on-farm in Saskatchewan was $50 to $60 per tonne less.
“The price of the fertilizer imports have improved since that time,” he said.
Caleval also acknowledged that quality fertilizers have also been brought in through the Port of Churchill from Russia.
“We work with the Canadian Wheat Board to make sure there is a return cargo for the vessel coming in,” he said.
There is also fertilizer that was brought in through the Port of Montreal that is currently being shipped out to producers in Western Canada at present that is cheaper than what local fertilizer dealers are selling the product for, Caleval said.
Caleval and Wishart noted there are some private individuals who were also bringing in cheaper fertilizer alternatives.
“There is a danger of being told one thing and later discovering that the deal was too good to be true,” Caleval said in a warning to producers. “It’s important for the groups and individuals who are considering these imports to do the due diligence.”
He noted that a group of producers from Alberta recently learned that lesson.
“This group kept seeing these cheap prices in various parts of Russia and figured they would give it a try,” Caleval said. “However, there were problems with the quality of the product, there were also currency transition issues, they had to get shipping, then had to get the product transported to a port to be loaded, they had to get a vessel, then get that ship across the ocean…and by the time it would have been delivered to the producer in Western Canada there was definitely not the price advantage that was first claimed.”
The plan as a result, fizzled out, Caleval said.
Some cheaper fertilizers have started coming through the regular channels, according to Kevin Hursh with Hursh Consulting and Communications Inc., in Saskatoon, Saskatchewan.
He noted that some distributors didn’t buy as much fertilizer at the high price levels and they now have an advantage. Other organizations are biting the bullet and lowering prices to compete.
“Urea that was over $900 a tonne is now $600 or less at many retailers,” he said. “Phosphate has also been cut to around $895 a tonne from over $1,300.”