Fuel, fertilizer prices perplex farmers

By Kristi Pihl, Tri-City HeraldMarch 26, 2012 

— Franklin County farmer David Manterola compares buying fertilizer and fuel with playing the stock market.

Price fluctuations have been crazy for the past five years, Manterola said. And retailers say the price of fertilizer has gotten less connected with the actual production cost as the worldwide market for fertilizer expands.

"I personally don't worry about it too much," said Manterola, who grows mainly alfalfa on his 1,200 acres.

Manterola said he tries to buy fertilizer and diesel when he thinks it is the right time. He recently filled up his tanks. But just like with the stock market, he said he has a 50-50 chance of being right on his guess as to if the price will go up or down.

Growers don't have enough storage capacity to buy all the fuel and fertilizer needed for the whole year, he said.

"Most of us are at the mercy of the market," Manterola said.

The price of fuel is an unknown farmers can't control, Manterola said. And it can carry fertilizer up and down with it.

Jex Biorn, business unit manager for the McGregor Co.'s stores in Eltopia, Kennewick and Milton-Freewater, said he has gotten more questions and concerns about fertilizer prices from growers this year.

Rising gas costs influence the transportation costs of what it takes to get fertilizer around the world, for example, from Louisiana's Gulf Coast to the Northwest, Biorn said.

But Kelvin Ayers, western/northwest operations fertilizer director for Wilbur-Ellis Co., said transportation is only a minor part of the cost of fertilizer.

Fertilizer prices have become volatile, Biorn said. In 2007, the prices spiked to record highs and, thankfully, haven't returned to those levels yet, he said.

The four major fertilizers used in the United States have bases of nitrogen, phosphorus, potassium and sulfur, Biorn said.

Most nitrogen-based fertilizers use natural gas as a raw ingredient, and the cost of natural gas is at a historic low, unlike oil gasoline prices, Ayers said. It appears natural gas prices will continue to remain low because production is up considerably.

A few years ago, when natural gas prices were up, production costs were causing the price of fertilizer to rise. But now fertilizer costs are being driven by demand, Ayers said.

Fertilizer has become a commodity traded in the worldwide market, with countries such as China and India needing fertilizer as they ramp up their food production, Biorn said. And that puts demand on the fertilizer supply chain.

The United States doesn't produce enough fertilizer for its own use and has to import it, Ayers said.

There hasn't been stability in the availability or price of fertilizer since 2008, said Brandon Brook, Wilbur-Ellis Co.'s Columbia Basin area manager.

"It's a world market," Brook said. "And what goes on in China and Russia with fertilizer and India and Brazil affects us more than ever."

Those countries are growing and need fertilizer to grow their own food and animal feed, he said.

For retailers like the McGregor Co. and for growers, there is less of a correlation between the cost of producing fertilizer and what they pay for it, Biorn said.

Instead, suppliers are charging what they think farmers can afford to pay, Biorn said. That has become the new normal, rather than having the cost being driven by manufacturing.

Farmers can't regulate fuel costs and can't burn less diesel and still produce their crops. So they look at what else they can trim back on to increase profit margins, he said. That includes fertilizer and other items such as seed treatment.

Gary Larsen of Larsen Farms said that when fertilizer prices are high, he doesn't put extra fertilizer on his crops of asparagus and potatoes to try to get a higher yield. That's a gamble that might not pay off.

Fertilizer prices can change each week, Brook said.

"All we can tell them is what the price is today," he said.

But Brook said they do their best to keep growers aware of what the market is doing.

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