Analysis: U.S. farmers may fail in fertilizer face-off

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February 13, 2012 (Source: Reuters) -- Steve Georgi is playing chicken with the world's biggest fertilizer makers.

The Indiana corn grower has postponed buying the fertilizer he needs for spring planting for only the second time in 35 years, angry that prices for key nutrients surged more than one-third in the fourth quarter.

"I haven't bought anything yet," said Georgi, who normally makes his purchases around the beginning of the year. Prices are so high "it's ridiculous," he said.

Fertilizer prices jumped last fall on global demand and expectations for a large increase in corn plantings in the United States. While those expectations have not changed, the price spike has triggered a buying boycott by farmers across the Midwest, pushing sales volumes of key products to their lowest levels since the financial crisis crushed demand in 2008.

But farmers may lose in the face-off unless they place their orders soon.

Fertilizer distributors, many of whom were burned when demand evaporated in the 2008 price crash, no longer maintain large local stockpiles. That leaves some unable to accommodate a last-minute buying spree, meaning farmers who wait to buy may have to delay plantings or grow something besides corn.

Good weather helped farmers produce a record corn yield in 2009 even after they cut back on fertilizer used to increase output. Now, with U.S. corn inventories at their lowest level since the mid-1990s, any threat that plantings or yield may fall short of high expectations could fuel new fears about supplies and stoke a price rally.

"It's getting very close" to planting time, said Harry Vroomen, vice president of economic services for The Fertilizer Institute. "They can't delay forever."

SURPRISING DEMAND GAP

The buying boycott is the latest sign of a broader trend in which farmers, now flush with cash, are seizing more control over their operations and exerting more market power.

Net farm income jumped 27.5 percent last year to a record $100.9 billion, giving many farmers the flexibility to break free of traditional practices. Many have installed their own storage bins, giving them more leeway in timing the sale of their crops and exacting a higher premium from grain companies.

Read more at http://www.potashblog.com/2012/02/analysis-us-farmers-may-fail-in-fertilizer-face-off.html
 
 
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