Fertilizer woes go global, look to continue

KANSAS CITY, Mo. — Even in “The Happiest Place on Earth,” Josh Linville was still thinking about the country’s — and the world’s — fertilizer situation.

Linville and his family traveled to Walt Disney World for a family vacation in September as the U.S. and global fertilizer market was changing on almost an hourly basis.

Linville, a senior risk management consultant for INTL FCStone, kept on top of the details and sharing information on Twitter: “Just did splash mountain and thunder mountain and I’m still fretting about nitrogen!!”

In a phone interview, post-vacation, Linville told AgriNews: “Just trying to keep up with it all is exhausting, just the market movements every single day. My wife probably deserves another vacation. I did my weekly video in front of a castle and I was taking phone calls while we were waiting on rides.”

He added that his wife was understanding.

“She gets it, but it doesn’t make it any less good,” he said.

The fertilizer situation, with shortages of some inputs predicted for the spring 2022 planting season, is a global situation and one that Linville doesn’t expect to settle down anytime soon.

“Unfortunately, I think we see a lot of these problems continuing all the way through next spring. You go back to the European natural gas, the futures show those prices staying up all the way through April of next year. The Chinese government is talking about these export bans being in place until June 2022. A lot of these issues look like they have some staying power,” he said.

Linville emphasized that this isn’t a situation of the industry crying wolf.

“Our industries are all famous for talking like that. If you don’t do this, then it won’t be there — and it always ends up being there. But this year sure has a lot different feel to it. When you go out there and it doesn’t matter what you are willing to pay on UAN, you simply cannot find the product, that’s scary,” he said.

From Europe to Asia, the challenges and concerns on the fertilizer market are global.

“A big one right now on nitrogen is the European natural gas situation. As long as those prices stay well into the double digits, nitrogen production there is going to struggle to produce. They simply cannot buy the natural gas inputs and sell the fertilizer at a profit. The fertilizer market isn’t that high. That doesn’t take out a plant; that takes out an entire region of nitrogen production, so that’s an issue. In Asia, natural gas prices there have been jumping up. It’s not getting talked about nearly as much as the European deal, but that’s another segment of nitrogen production,” Linville said.

China represents a major piece of the global fertilizer situation.

“China is always a big one. They have had a lot of blackouts from lack of energy and they have been struggling. The government has been going to phosphate producers, for example, and basically telling them, ‘You won’t export. You will keep these tons at home for Chinese farmers.’ The problem with that is China accounts for 39% of the world phosphate operating capacity. They are 32% of all the tons around the world that are traded. If they all of a sudden go from 32% of the tons in the world to zero, you just lost 4.5 million tons. It doesn’t matter if you are the biggest trader in the world or if you just happen to be some random small farmer in northeast Kansas, it is going to have an effect on your operation,” Linville said.

While North America produces the mass of the nitrogen it uses, the United States does import around 5 million tons of urea. The United States also produces almost all of the UAN and anhydrous it uses, as well.

So, does that solve the problem? Not quite, Linville said.

“A lot of people say, ‘Well, we produce our own and our input costs for that production are really low, so we don’t have to be high priced.’ The problem with that thinking is that you assume we are our own market. We are not. If the price in the U.S. drops substantially below the rest of the world, producers of those products here will say, ‘Fine, if the U.S. doesn’t want it, if Canada doesn’t want it, we’ll just export it.’ They have done that before. These facilities are built to make money and that’s what they do. They go and find the best market out there,” Linville said.

What would have to happen for global fertilizer supplies and prices to return to a comfortable level for U.S. farmers?

“It would take some major global events to have it all come together. You would need to see a combination of U.S. corn acres dropping from the current expectation of 91 million down to 86, 87 million acres. You would need to see the European natural gas prices starting to fall back down to single digits again. You would have to see the Chinese government doing a 180 and all of a sudden not just allowing exports to happen, but ramping up exports once again,” Linville said.