The facets of a fluctuating market
Read a one page Executive Summary or the complete text of TFI’s comments in response to the U.S. Department of Agriculture’s Request for Information on Competitiveness in the fertilizer industry.
Because of the various resources needed to produce it and the enormous scope of distribution around the world, fertilizer is closely tied with many other industries. Its cost then can be affected by several economic factors, including supply and demand, responses to commodity prices and global supply. These factors are:
Commodity Prices
The prices for corn, wheat, soybeans and other crops are constantly fluctuating. Farmers will decide which crops to plant based on their potential for profit which, therefore, affect the demand and cost for certain nutrients.
Transportation Costs
Fertilizer is a bulky, heavy product that is shipped great distances by several modes, including ocean tankers, railroads, trucks and river barges. They all run on petroleum products, so higher oil prices increase fertilizer’s transportation costs.
Natural Gas
Natural gas performs two functions in the production of fertilizer. When making nitrogen-based fertilizers, natural gas is first combined with atmospheric nitrogen to create ammonia. It is also used to generate the heat needed for the conversion process. Natural gas prices and availability impact the final nutrient production costs.
Farmers, and the fertilizer industry as a whole, keep tabs on all these costs in order to plan for the future and stay cost-effective. This helps to ensure the produce we buy in the supermarket is not only nutritious, but affordable as well.