US Farmers In Standoff Over Fertilizer Prices
March 24 2009 - 2:33PM
Dow Jones News
U.S. farmers are involved in a "pricing stalemate" with retail
crop nutrient suppliers that could impact yields and supplies this
year, according to one of the country's largest producers.
A senior executive at Mosaic Co. (MOS) said while demand for
phosphate-based fertilizers is starting to recover, the industry
needs to adjust pricing and inventory writedowns to kickstart the
market.
Fertilizer demand soared in the wake of rising commodity crop
prices, helping boost yields, only to tumble in the wake of the
market reversal that started last August.
Many farmers have opted to delay buying fertilizer, as well as
equipment like tractors, ahead of the upcoming planting season.
Sellers have been stuck with highly priced inventory produced
during last year's boom.
Mike Rahm, vice-president market analysis at Mosaic, noted the
pricing standoff in slides accompanying a conference presentation
in Houston.
Rahm noted demand for phosphate-based products had started to
improve, sparking new production, while buyers of potash-based
supplies remained on the "sidelines."
His comments on demand conditions echo recent remarks by other
industry executives, with further insight expected next week when
Monsanto Co. (MON) reports fiscal second-quarter results.
Monsanto is the world's largest seed supplier by revenue, as
well as a producer of herbicides and other crop nutrients.
Sector valuations across the sector have fallen heavily, with
Mosaic down 72% from its 52-week high and Monsanto off 42%.
Monsanto has argued it is more resilient as farmers typically
prioritize seed purchases over fertilizer and capital
equipment.
In his presentation, Rahm noted demand from India remained
strong, helped by a government price cap while the Brazilian market
was "uncertain" and China remained a "wild card" because of export
taxes and procurement policies.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135;
doug.cameron@dowjones.com