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Farmers and ranchers are casting a wary eye on fertilizer costs because of continuing price volatility in commodities and the overall economic uncertainties that blanket America's landscape.
"We changed our whole program up. We're cutting back on cotton and grain sorghum acreage and anything that uses a lot of fertilizer," said Joe Wilder, who has been farming and raising cattle in the Brazos Valley for more than 40 years.
For decades, cotton has been the main crop on the Wilder family farm. But Wilder made the tough decision last fall to convert 70 percent of his cotton acreage to soybeans and winter wheat crops, which require less fertilizer.
Wilder buys fertilizer in the fall, when prices are traditionally low. In September, he paid more than $500 a ton for fertilizer. At that price, he bought only enough to get row crops up and growing.
He says he'll wait as long as he can before he buys more; he's not going to tie all his money up in high-priced fertilizer.
He also spread fertilizer over most of the farm's grazing pastures.
"I think ranchers are the same way. We fertilized most of our pastures this year. We're going to wait and see what the price does before we do any more," Wilder said. "Looking at the price of cattle, I don't know if we can do it."
Numerous factors have affected the price of fertilizer, including a weak dollar, continuing consolidation of fertilizer and chemical companies, bankruptcies, U.S. corn-planting acreage and overseas fertilizer demand and production.
Prices for fertilizer stocks started climbing in the fall of 2007 and reached record highs in the first six months of 2008. Urea was selling for $800 a ton, phosphorus hit $1,200 a ton and potash also was expensive. Prices got so high that many producers stopped buying. Now, some wholesale companies have an abundance of fertilizer mixture inventories sitting on offshore barges. These companies bought stocks while prices were high, and they will lose money if they sell now.
"Our movement has been decimated. We've lost 42 percent of the [retail] demand in Texas, down from 2005," said Toby Hlavinka of East Bernard, a regional fertilizer manager for the Southern United States for Helena Chemical Co.
He said barge prices for ingredients such as diammonium phosphate -- a source of nitrogen -- peaked at $1,100 a ton and by August had hit $280 a ton. Phosphate prices have been cut a third from their summer peak. Nitrogen prices continue to adjust downward at nearly half their peak price, and potash prices should be substantially down. Dry fertilizer has been quick to go down, whereas liquid has not, Hlavinka said.
Although prices have plummeted, a rally in corn prices could push up prices again, he said.
Hlavinka said it could take the entire spring season to pull fertilizer inventories down to historic levels.
Factors such as drought, hurricanes, flooding in the Midwest and cattle prices also have added to marketplace volatility.
"I've got cattle people that bought 125 truckloads before and bought six truckloads this year," he said.
Market volatility in the agricultural and financial sectors will continue to create uncertainties for farmers and ranchers when making risk-management decisions.
"Our people in Texas are very risk-adverse. They control risk," Hlavinka said. "I think 2009 is going to be a very different time in this industry."
Wilder says that in his 40 years of growing crops and raising cattle, he's never experienced such a volatile economy.
"We're not going to spend any money that we don't have to this year. It's kind of frightening," he said of the economy. "We're going to be real conservative. We've got to."
