By Roger Ginder, Department of Economics 

Major change in retail fertilizer markets over the past three years include price volatility and price increases. But, in addition to the unprecedented price volatility, basic changes in the trade practices at the manufacturing, wholesaling, and retail levels in the fertilizer value chain are affecting producers.

Some date the start of the changes to 2003-2005, when the two large farmer-owned manufacturing firms, Farmland Industries and CF Industries, exited the industry. But the transition of fertilizer manufacturing from a North American midcontinent industry to a more global industry had begun in the mid to late 1990s at the time Nitrogen Fertilizer manufacturing become a global industry. Relatively low natural gas feedstock prices in the Former Soviet Union (FSU) and the Middle East favor more offshore production of nitrogen product. But the need to ship the finished product over a much longer distance means that the lead time required between manufacture and delivery is much longer.   It also means that international exchange rates become a factor in fertilizer pricing. The significant decline in the dollar’s value earlier this year resulted in stronger grain prices, but it also increased the import price for many fertilizer products.