SIOUX CITY (KCAU9) — With a pandemic, a drought, and rising energy costs globally, economists are calling it a perfect storm that has hurt supply chains for nearly every commodity, including fertilizer.
Nutrien is the largest producer of potash and third largest of nitrogen fertilizer in the world. They can produce up to 27 million tons of fertilizer annually from their plants in the U.S., Canada, and Trinidad.
Over the course of the last year, prices of fertilizer have nearly tripled in some markets due to several factors, including the spike in natural gas prices, leaving global production in a standstill.
“Which has caused plants across Europe and the UK to either curtail production or even in some cases shut down nitrogen production completely because it’s unrealistic that they’re going to be able to recover that increased cost in production so it’s forced them to shut down,” says Nutrien Vice President of Sales Chris Reynolds.
The North America Fertilizer Price Index is at its all-time peak at more than $996 per short ton, surging past the previous record set in 2008 when the country was in a financial crisis.
Reynolds explained why the current market is even worse than that point 13 years ago.
“The inventory position on the supply chain was in much better shape this time in 2008 compared to where it is today. Today, that inventory position is much lower and leaner which is keeping the tension on this price on the supply side in the face of what we’re seeing is some very strong demand,” Reynolds said.
Mark Degan sells fertilizer at Borchers Ag Supply. He said a ton of standard product cost $190 last fall.
Now, wholesalers are asking $540 a ton. Degan spoke on how these record high prices will affect farmers in their next growing season.
“People are going to switch to more soybeans because you don’t need nitrogen, so they’ll switch to soybeans and some guys won’t put as much on, so we’ll have lower yields next year,” said Degan.
Reynolds said that fertilizer prices may not return to normal until next spring but that it all depends on what the yield forecasts and natural gas prices look like then.