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Anhydrous verses UAN and Urea
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FromTheProductionSid
Posted 1/18/2019 16:45 (#7254291 - in reply to #7249607)
Subject: RE: Anhydrous verses UAN and Urea


To be 100% open, I work for a fertilizer producer.

I read through this post and the comments and it's the same thing I always hear from farmers... "I'm getting screwed". The only thing that's screwing the people who commented here is your lack of facts. There is more nitrogen produced in the US than can be consumed. Many of you are wondering why it isn't selling for cost. When you go sell grain is the first question the buyer asks is "what did it cost you to grow?" Of course not, there's a market for corn, beans, cotton, potatoes as well as any other major commodity.
But what sets the prices for grain? Supply and demand do but you already know that. Fertilizer is a commodity and cost is important but it's the producer who can't produce it for the market cost is the one that doesn't produce. In North America we have heaps of shale oil and gas and that means fertilizer production costs are lower than they were 10 years ago. Natural gas costs have gone up in most other places around the world (oil prices are all over the place) which means their fertilizer production costs have gone up. It's producers in Europe, Asia and South America who are the producers faced with shutting down production like what happened in the US in the 90's and 2000's when dozens of fertilizer plants shut down.
The world has XX demand for grains each year and that sets the demand for fertilizer. The cost of production will determine who makes it but North American producers will run at maximum rates because it's profitable. There are thousands of nitrogen producers in the world and many of them sell to multiple countries with ocean vessels and rail cars passing in the night. Sometimes buyers don't want to buy when sellers want to sell and it goes the other way too. In this modern world sellers and buyers find each other - that's what makes a market.
If you think fertilizer producers can force buyers to pay whatever price they want you're nuts. If producers here are too high import tons will flow here in a hurry but you'll need a warehouse or a tank to put them in as well as the assets along the coast to receive the product off a boat. You may or not be aware that coastal or river assets are expensive for real reasons. Waterways are important and sensitive so you'll also need a bunch of approvals and registrations which are more complicated for some products than others. You might have to lease transportation assets for 12 months to make sure they're available when your boat arrives. You'll need full time employees some of which have skills that are difficult to find.
North American producers have those same issues. Warehouses, tanks, transport assets, regulatory, insurance, people, financing, legal. Adds up to a big bill.
Even with those costs North American fertilizer costs have been selling at values well below what they could be imported for. Still nearly all fertilizer made in North America stays here. Does that happen with grain? No, farmers chase the best market they can which is a good thing for everyone.
Who's getting screwed? Before throwing around accusations you should do a bit of homework.
And btw, the idea of reducing rates to impact fertilizer prices is ridiculous. If you reduce rates you will reduce yields or else you would have already done it.
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