Farmers looking to get a good deal on their fertilizer this season will be waiting for a while, say analysts with Farm Credit Canada (FCC).
In the spring, prices are always higher than other times of the year, says J.P. Gervais, chief agricultural economist with FCC, mostly because farmers use it the most during planting season.
In April, 2014, the FCC forecast the rates would drop to $500 per ton in 2015 for urea and phosphate but production has not increased, leading to higher prices. “We keep expecting more production to come online,” insisted Gervais.
As of March 11, data from Alberta Agriculture and Rural Development shows phosphate peaking at just over $800 per ton in June 2014, and dropping to just over $790 per ton last January. Urea prices peaked at just under $750 per ton in June and dropped to just over $600 per ton last January.
“Overall demand hasn’t slowed down much and we haven’t seen the supplies as projected,” Gervais added.
He expects the market to move sideways for some time. Farmers are trying to manage these expenses by storing as much product as possible and buying in the fall, when the rates are slightly lower. However, with a lower Canadian dollar, a farmer’s purchasing power is going to be limited.
“I think we’ve seen more producers expand the storage capacity on the farm,” said Gervais.
The question Gervais often hears is, “Is this good or bad?” but he suggests the real questions people should be asking are “Why is it (prices) up and why is it down?”
Oil prices are down because of a saturated market but the demand for ag related products are still there, which Gervais feels is good for the industry. If the demand was also down then “you would probably notice weakness in agricultural commodities.”
When looking at the current market, Gervais says analysts at FCC consider urea and phosphate prices to forecast future rates. Despite the desire for more fertilizer, manufacturers have not increased production to meet that demand.