With Spring seeding approaching farmers are finalizing their seeding plans and lining up crop inputs like fertilizer.
Matthew Krutzfeldt, the senior fertilizer merchant with Federated Co-op says buying fertilizer in the spring can prove costly because it's harder to bring product up through NOLA as it won't get here in time.
"Any domestic suppliers or brokers that have inventory on hand for Western Canada can start to get a bit of a premium. That's where we see prices start to appreciate because the calendar is against us and we can't get in cheaper imports. Like I said, domestic suppliers can charge a bit of a premium for the tonnes that are close at hand."
He points out that last year, fertilizer prices hit record highs with lots of retailers getting caught so this year they seem to be taking a more conservative approach when it comes to keeping product on hand.
"One of the things that has changed in the last few years is on phosphate. With no manufacturing capacity in Western Canada, our only domestic suppliers are Simplot and Nutrien out of the U.S. The biggest imports into Western Canada come from Morocco, they are the largest manufacturer and have the largest reserves of phosphate rock in the globe. That one, you know, is very tight just due to the logistics that it takes to get here. So, you know, lots of plans have been put in place and we're sitting fairly well. Urea, we have lots of manufacturing capacity in Western Canada and so that one, even though lots of tonnes have gone to the states we should be sitting fairly well, as far as needs. Of course, crop conditions or environmental conditions going into Spring can always sway things quite a bit."
Krutzfeldt says two years ago, we had a pretty wet spring, especially in Manitoba, so there was lots of fertilizer that didn't get applied which resulted in a build-up in reserves. Last year we had a very early spring and a well-run spring where all acres got planted with the planned fertilizer use, and probably even a bit more given where grain prices were.
"So we saw a real drawdown on the system from an inventory perspective. This year is kind of shaping up like it could be an early year, but it is quite dry in some places and so that could maybe make growers pull back a bit on inputs and we'll balance things out. "
He says the most consistent time of the year to buy fertilizer when it is the most affordable is the July to September period.
"Typically, in North America, that's the slowest time as far as inputs. So manufacturers are usually rebuilding supply and there's not a lot of retail or grower demand. There's the risk that goes with carrying that inventor for 10 months until it's needed for the next crop cycle. Manufacturers need to incentivize a retailer or a customer to buy that tonne with some confidence that it's not going to be too risk-averse. And so there'll usually be some discounts or what we call a fill offer. That will allow some good savings, you know relative to where we would just have come off of and that's typically the best time to buy."
Krutzfeldt says the expectation this year is that we'll end May as a system quite empty on the retail and manufacturing side of things.
"Lots of urea tonnes went down to the U.S. this year and so we don't have a lot of reserves that we would typically have. So even if we see some discounting this summer, the volumes or the availability might be limited. And again, if demand is very high, it's always that balancing act of supply and demand. We could see prices run back up in short order due to the limited supply, and then we could see maybe some discounting later in the summer again, as that supply returns and demand subsides. Last year we saw quite a few hills and valleys or spikes in appreciation, and then that demand would go away and the price there would drop again. "
Last year we had a very early spring and a lot of acres got planted with fertilizer given where grain prices were, so we saw a real drawdown on the system from an inventory perspective.
2024 is shaping up like it could be an early year, but it is quite dry in some places which could mean some growers may pull back a bit on inputs.