What Does Fertilizer Really Cost?

What Does Fertilizer Really Cost?

Due to poor fertilizer application seasons in 2019, inventories are over-supplied, and prices are near historic lows. Lock in your spring and fall 2020 needs before there’s a price rebound.

This has been the message of ADM Farm Direct Fertilizer over the winter. Their monthly conference calls and a mobile price app are designed to help you lock in favorable prices and buy in bulk directly from an ADM terminal—often at a significant price break.

“Everything’s a buy right now, from a historical perspective,” said Jake Niederer, Director of ADM Farm Direct Fertilizer, in his January call. “But I begin to sense the tide turning.” 

What drives fertilizer prices, and how can you exploit this market? That’s the topic of our current In the Driver’s Seat podcast, recorded at the Farm Progress Show.

We join Niederer and three members of his ADM fertilizer team as they discuss the growing popularity of this option:

Here are highlights of our conversation with Niederer and ADM fertilizer representatives Troy Eikenberry, Dale Jackson, and Zach Jans.

How does ADM keep up with where prices are headed? What’s our methodology?

Niederer: Fertilizer, like any global commodity, is driven by supply and demand. We spend a lot of time studying the supply and demand around grain, which ultimately drives the consumption of fertilizer. Each nutrient is used in different regions of the world at different times of year, so our network of suppliers, distributors, and customers allows us to do price discovery on a daily basis.

So there’s a world market for fertilizer, just like there is for grain?

Niederer: Very much so. In fact, on the Chicago Board of Trade, you can look up the fertilizer derivatives for urea and phosphates, for example. What we’ve tried to do is make this pricing more transparent so growers can make better decisions. Fertilizer is a huge component of the overall farm budget. 

How can farmers themselves stay up to speed on local fertilizer prices?

Jackson: You have to respect the global market trend, but also overlay it with a local point of view. That’s where keeping in touch with your regional ADM representative is valuable. If we know 10 local fertilizer dealers have full sheds, it’s probably not as important for you to step in and lock in a price. We also offer a fertilizer app that you can download on your phone. It shows you the price of products at ADM river terminals up to a year out. 

What fertilizers does ADM offer? 

Jans: We specialize in dry fertilizer—nitrogen, potash, and phosphate—but we do move anhydrous ammonia if a farmer has the high-pressure bullet that’s required to receive delivery. The cool thing about ADM is our global perspective versus a local store front. We don’t have just one MAP or DAP product line. We can offer more complex formulas such as NPSZ and 0-45-0, and micronutrients like zinc, boron, sulfur, or nitrogen inhibitors. Beginning in 2023, we’ll be offering POLY4, a potassium-sulfate-magnesium-calcium product with an organic certification.  

And ADM is expanding its blending capabilities, right?

Niederer: That’s correct. We’ve invested a lot of money in these terminals, putting high-capacity, high-speed blenders in there. It’s really cool to watch a blended load get dropped in under four minutes.

Does a producer pick up the order or does it get delivered? How does the process work? 

Jackson: We sit down and figure out what makes the most sense. If it works for a farmer to drop a load of grain at one of our river terminals and head back with a load of fertilizer, fantastic. If it makes more sense to have it backhauled on one of our ADM trucks, great. The nice thing about ADM is we have trucks constantly traveling around the country. We can arrange what makes the most sense for that producer.

How can you help farmers set up the infrastructure to buy and apply their own fertilizer?

Everybody’s situation is slightly different. Some guys already have the spreader and it’s as simple as finding them a conveyor to offload products from a truck. In other cases, they’re distant enough from a river terminal that we have to look at storage options. We offer financing for Meridian stainless-steel, poly-coated upright tanks, and with Greenfield Contractors for hoop-style buildings. In some cases, farmers don’t have any equipment, so we work to provide them options. The good thing about ADM is all our connections. We can point them in the right direction on the best places to get a spreader, a conveyor, and storage.

What’s the purpose of the historical fertilizer price charts on ADMadvantage.com? 

Niederer: There’s a couple ways to look at buying fertilizer: Either pure price, or when is the right time to buy. Looking at history is a great place to base your opinion. If you can see that the last five years, UAN is trending low in October, as opposed to June-July, that begins to build your point of view. 

Can producers run cost scenarios on fertilizer before jumping in to buying direct?

Jans: Absolutely. We have a fertilizer cost calculator that allows you to see potential savings. We’ll help you put in any storage, equipment, or transportation costs for getting the product from an ADM terminal and spreading it yourself. That way, you get a full transparent picture of value to the farm and a real sense of what it’s going to cost to jump into the market. Just ask one of our representatives to sit down and use this tool with you. 

Can ADM help calculate the grain price I need to offset fertilizer costs?

Niederer: Yes. The thing I like about the calculator Zach mentioned is that it can help look for margin opportunities with grain sales. It helps shift your mentality: Quit trying to buy the low of fertilizer and sell the high on grain, but lock in the widest margin. That’s really what we want to help the grower realize. It’s ok if you paid a little more for your fertilizer if you sold your grain at the right time. You took risk off the table, and it’s hopefully going to yield more profit. Working with an ADM representative can really help integrate your input costs and grain sales.

How fast are farmers adopting this new way of buying fertilizer?

Jans: The capabilities of blending, along with the logistics strength ADM offers, has allowed fast growth in my territory of eastern Minnesota, Wisconsin, and western Illinois. Over 100 farmers have come on board in just the last two years.

Niederer: The growth rate has been strong across the board. Growers are saving money. 

Any last thoughts for farmers who might be on the fence? 

Niederer: If farmers are in a proximity of our assets and they’re not doing business with us, I’d seriously ask why. If they’re lacking in equipment, we’re trying to create options so that’s not a problem. If you can figure out equipment and labor—the other big factor—this method of buying fertilizer is going to save you money, year in and year out. Farmers also appreciate the ability to put the fertilizer on when they want to, as opposed to waiting in line in the local market. It’s putting power back in your hands.