The election is finally over. But during the heat of the debates, about the only thing fertilizer executives had to say about the candidates was that they hoped a more balanced energy policy could be achieved once one of the candidates conceded and the other offered his thanks to the country.

“In light of rising energy costs and tight supplies, we need to explore and develop new energy [sources], continue to promote their efficient use, and employ a variety of technologies to produce them,” says Michael Rahm, market analyst and strategic planner for the Mosaic Company, recently formed by the merger of IMC Global and Cargill Crop Nutrition.

David Delaney, president of PCS Sales at PotashCorp, takes it another step, suggesting that energy costs go far beyond fertilizer manufacturers, retailers and the growers who use plant nutrients.

“Ultimately, higher energy costs are reflected in everything from manufacturing of the steel used in parts to build and repair combines and tractors, to producing and delivering countertops in farm kitchens,” he says. Extrapolate that concern a little further: The local hardware store owner, banker and just about everyone else is affected by rising energy costs.

Late this fall, the national average price of gasoline at the pumps hovered at $2.05/gal., and growers burned record levels of fuel as they filled grain storage bins to the brim with this year's record harvest. (USDA estimated the U.S. corn crop at 11.61 billion bushels in its October 12 report.)

“After five consecutive years of shortfalls, this year's good weather meant record harvests, not only for U.S. farmers, but for those around the world,” Delaney says.

“However, global grain production exceeded the rising demand by only a small margin. The 2003-04 ending global grain stocks-to-use ratio of 16.9% set a 30-year low. The 18.1% projected ending stocks-to-use ratio for 2004-05 would be the second lowest level in the past 30 years.”

The increased grain consumption and demand are due to the growing populations in the world's developing countries where achieving higher income translates into a demand for more and better food.

Bumper yields this year, coupled with USDA's 2005 crop acreage forecast for corn (up from 81 to 81.1 million acres — a 2.3% jump) bodes well for retailers. Soybeans are up from 75.1 to 75.2 million acres, a 1.7% increase. Looking at these predictors, Delaney thinks that growers will choose to restore soil fertility during the 2004-05 fertilizer year. He anticipates a 1 to 2% increase in fertilizer applications over 2003-04.

Mosaic's Rahm agrees that grain and oilseed demand continues to grow, fueled by decent economic growth worldwide, a cheaper dollar and increases in nonagricultural uses such as ethanol production. However, he says, next year's commodity prices “depend on many factors, including the size of the current South American crop, the import appetite of buyers such as China, and the weather during the next growing season in the Northern Hemisphere.”

John Malinowski, marketing manager of fertilizer products at Simplot Soilbuilders, warns that growers base their fertility decisions on a myriad of economic factors. “Soil tests, albeit very important, are just one of those factors in regard to plant nutrient decisions,” he says. Crop prices, target yields, risk tolerance, moisture conditions, weather forecasts and cost of operating capital are just a few of the many other factors that go into that decision. However, the bottom line, Malinowski says, is that growers have a good understanding of their optimization point and will fertilize to hit that target. Although Simplot Soilbuilders, as a phosphate producer, is concerned with significant cost increases in sulfur, ammonia, and transportation, Malinowski says the good news is that interest rates have remained relatively low.

Richard Downey, director of investor relations at Agrium, expects that, after large yields and strong U.S. farm incomes, growers will check nutrient levels both this fall and next spring. He says, “We anticipate relatively strong fertilizer demand, although weather is always a wild card.” He adds that there is a chance farmers may not put optimal levels of potash and phosphate down, given the higher input costs this year.

Although most fertilizer manufacturers will not make public their forecasts for prices, Downey agrees there is a consensus among the market analysts that the current tight supply/demand fundamentals for fertilizer products will continue throughout 2005. “Global potash markets are extremely tight due to strong world demand that appears to continue unabated,” Downey says. He adds that high production costs and good demand for phosphate are anticipated to keep that market tight into 2005.

Even though prices are predicted to be higher, Mosaic's Rahm is convinced that growers will be looking to replenish the nutrients removed by record yields. “After this year's bumper crops, it's more important than ever to replenish the soil,” Rahm says. He also believes that because some growers may be tempted to skimp on soil fertility needs to save money in the short term, now is the time to emphasize the importance of regular soil tests and plant tissue analyses to accurately determine crop nutrient needs. “Incorporating these test results into a soil nutrient management program will ensure efficient fertilizer use and maximum results,” he says.

IMC Global and Cargill Crop Nutrition have combined to form the Mosaic Company. The name Mosaic symbolizes the close collaboration between the new company and its customers, suppliers and communities. This publicly traded company provides phosphates, feed phosphates, potash and nitrogen and has production facilities in Florida, Louisiana, Michigan, New Mexico and Saskatchewan.

Mosaic states it will continue the commitment of its predecessors to education, research and training for the benefit of dealers and growers. With 8,000 employees in 15 countries, the new company says it is positioned to better serve customers with a broader product mix together with the industry's best agronomic information and marketing support.

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