Seed & Chemical
Agrium set to ride out market mayhem
Fertilizer companies in Canada are facing challenges on various fronts: grappling with a tightening economy, spiralling input prices and a farmer clientele that is waiting to purchase inputs, and all in a climate where credit is not readily available. Yet there is optimism at least for one company.
January 2, 2009 By Calgary Herald
January 2, 2009
Agrium Inc. president and chief executive Mike Wilson is following his gut instincts a lot lately.
The global economic recession is redefining norms everywhere and the agricultural sector is no exception.
It's become a place of extremes wherein reactive markets can eviscerate commodities in the blink of an eye, and where demand dynamics see farmers able to buy fertilizer holding out for fire-sale prices while those who want to buy can't, as access to credit has dried up.
The latter demand scenario has contributed to an unprecedented reduction in fertilizer use by farmers on a global basis this fall, which saw Calgary-based Agrium, North America's third-largest fertilizer producer, shut in production of nitrogen and phosphates earlier this month at some of its North America facilities.
Agrium isn't alone: Plants in the UK and the US have announced shut-ins for nitrogen and for urea, as well as phosphates and, in Canada, potash. Globally, output of all three nutrients has been trimmed.
For Wilson, a veteran commodities career guy who's ridden out recessions before, "though none with such a precipitous drop," the biggest surprise of recent events was that the farmers would cut back on their fertilizer purchase this fall to the degree they have.
"It's unheard of,"Wilson said in a recent interview at Agrium's suburban Calgary headquarters.
Farmers on a global basis are not buying fertilizer for various reasons: in Argentina it's drought, while in Brazil and Russia they're not buying as much because they just can't get access to credit, he said.
In North America, farmers aren't buying because they believe the price is going to continue to drop, and it's already come down quite significantly, Wilson said.
Analysts and industry experts generally agree that nitrogen prices have hit bottom while phosphate prices could lose more ground.
All-told, industry-wide North American sales of nitrogen in the fourth quarter are down about 20 percent, while sales of potash and phosphate are down about 50 percent, he said.
To this story in its entirety, go to: www.calgaryherald.com/Agrium+ride+market+mayhem/1132891/story.html