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Genoa City, WI | Like farmers, pretty much all fertilizer retailers are price takers, as well. Full disclosure: I work for a retailer. We changed our price on fertilizer 3 times in April. Why? We were trying to lock in a cost for replacement fertilizer for the rest of the spring season and fall, and literally every time we would call one of our suppliers, their price had gone up. We had a couple of choices, we could continue to sell at our lower winter price, and then have a huge price spike when we ran out of that supply, and had to switch to a new supply. Or we could ramp things up gradually and, yes, make some profit on the lower priced material. I know it's something of bad form to talk about retailers making a profit off of selling ag inputs, but the fact of the matter is we're in this business to make a profit, not just break even. I have six competitors in my local market, and believe me, we compete...we're not calling each other to determine where to set the fertilizer price. If my price is too high, my customers have no problem calling FS or one of the coops in the area to get another quote.
In the broader perspective, fertilizer is a commodity, as well. It's traded globally. I like to read this weekly report to get a general idea of what's going on in the global fertilizer wholesale market: http://www.fertilizerworks.com/html/market/TheMarket.pdf India and China are paying record prices for their fertilizer supplies as well, so it's not just high prices in our backyard. Global demand for fertilizer right now is huge...in the last five or ten years, world demand for fertilizer has increased so much that it is like we added another US-sized fertilizer consumer to the market. That's a huge price driver. The cost of manufacturing and transporting fertilizer has also increased dramatically.
And, yes, crop prices are very supportive of high fertilizer prices. If you want to look for someone to bitch at about high prices, look at Potash Corp's stock price. http://finance.google.com/finance?q=POT It has almost tripled since this time last year. Your local retailer's margins certainly have not tripled, I know this from experience. Like you, I think we're in for very high fertilizer prices as long as the crop price can support it...but even if we go back to $2.50 corn, I'm afraid we won't see $200 potash again. | |
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what if this is going on
