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Fertilizer Demand Expected To Grow

It will take both higher fertilizer and crop prices if the world is to meet the growing demand for food and fuel, says a British expert on international prices and markets for nitrogen, potash and phosphorus.

Barrie Bain, director of Fertecon, said the fertilizer industry needs prosperous farmers if it’s going to be profitable. “The fertilizer industry can only thrive when there is a healthy agriculture sector. When farmers do well, the fertilizer industry does well.”

He told more than 50 MPs, senators and Parliament Hill staff during a breakfast sponsored by the Canadian Fertilizer Institute that “increasing demand for both food and energy should mean improving crop prices.” Fertilizer purchases are a farmer’s investment in his operation.

His views got a bumpy reception from several MPs who’ve heard plenty of complaints from constituents about the rise in fertilizer prices especially in 2008 when growers thought they were finally going to cash in on decent crop prices only to see their fertilizer bill take a big jump.

One senior MP muttered, “This makes sense but how could I explain it to my voters?”

Alberta Conservative MP Leon Benoit got nods from many parliamentarians when he told Bain, “Few things bother farmers as much as fertilizer prices. Growers struggled for years with low prices and as soon as they go up, fertilizer prices eat up the increase.”

Bain said last year’s price spikes were due to the jump in demand for fertilizer globally once the higher prices became evident. Fertilizer prices have receded sharply since then. It’s likely prices will climb this spring once the prospect for crop prices becomes clear, he added.

The global fertilizer industry needs a major production costs to cover the cost of their investment.

He acknowledged that if fertilizer prices get out of line with crop prices, farmers reduce their use but that means lower yields at a time of growing demand for food.

On the global scale, Canada is a small user of fertilizer, the largest exporter of potash and a

“Few things bother farmers as much as fertilizer prices.”

expansion to keep up with the demand for more food and that means higher prices to finance new plants and mines, he said. “Fertilizer companies went through a long period when they didn’t have to invest in new facilities.” However demand for nitrogen, phosphorus and potassium has absorbed the industry’s capacity in recent years.

Bain said last year’s price spikes were due to the jump in demand for fertilizer globally once the higher prices became evident. Fertilizer prices have receded sharply since then. It’s likely prices will climb this spring once the prospect for crop prices becomes clear, he added.

To meet the higher demand, fertilizer companies face construction costs of US$1.2 billion for a one-million-tonne-a-year production plant. The bill for a similar phosphate plant is US$900 million a year while a two-million-tonne-a-year potash plant will cost about US$2.4 billion. Nitrogen plants can be brought online in less than three years while phosphate and potash projects can take four to seven years to commence production. To pay the bills, the companies need higher fertilizer significant supplier of nitrogen to the United States, he pointed out. Currently Asia “is the most important consuming region for fertilizers.” China and India are the biggest buyers but Indonesia, Malaysia and Vietnam are also significant markets. China has to import almost all of its potash requirements while India buys all three major fertilizers from other countries.

Bain produced graphs tracking fertilizer prices during the last few years that showed that both phosphate and nitrogen prices spiked during the summer of 2008 but have returned to their January 2007 levels while potash came down more slowly and not as much. The price farmers pay is the international one unless there is a government subsidy program such as in India, he noted.

During last fall’s price declines, many dealers were stuck with high-priced inventory that farmers couldn’t afford. “The sudden and sharp drop in fertilizer demand and prices has hurt dealers and many have gone bust. Throughout the world, local fertilizer dealers have been the worst hit by the sharp downturn that has hit agriculture and fertilizers.”

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