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A lot of businesses got caught in the big run up in commodities last year, including ethanol and fertilizer companies. Some dealers bought expensive nutrients last fall. Most of it is still gathering dust in warehouses.
Now the fertilizer guys want to pass on the cost of the mistakes they made. But pricey anhydrous won't pencil out on crop budgets, which is why so many more farmers than usual waited to buy nutrients until the prices softened this spring. Farmers tell us the dealers they hear from are standing firm on the $1,000 per ton ammonia they need to sell.
There are some stubborn folks on both sides of this standoff. In a recent Dow Jones report, Mosaic, the fertilizer company, warned that if fertilizer purchases didn't pick up soon the pipeline will be unable to move enough nutrients to the fields in time this spring to provide crops with maximum yield capability. It sounded like an ultimatum for farmers to come in and plunk down their cash.
In a survey two weeks ago we asked readers if dealers had started dropping ammonia prices. Thirty-eight percent said there was no change while another 30% said prices had dropped 20% or less. Nineteen percent said prices had dropped up to 50%.
"Prices in North central
Larger dealerships can eat some of the cost as a loss or cost average' with cheaper product to give customers a better deal. Smaller dealerships don't have that luxury.
A lot of farmers still need to buy fertilizer or shift acreage. Farmers are looking far and wide to see if they have other options. Some tell us half jokingly they'd like to make a run to the Gulf and see if they can get a deal. How they would get that back to their farms is pure fantasy.
Corn prices may continue to rally. If farmers see better breakevens, they just might end up bailing out these fertilizer dealers. Even so, there's a lot of hard feelings out there as a result of this standoff.
These business relationships benefit both farmers and dealers. Hopefully they can all - eventually - put the great 'fertilizer standoff' behind them.
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