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| I don't know which product or when you're talking about but I am certain you aren't looking at 5% of the things going on that contribute to higher or lower fertilizer prices. Time of year? Were the grain and/or fertilizer price increases local, regional, national or global? What was the S&D of fertilizer before the increase in grain prices? Was there an increase to cost of fertilizer production in an area with a bunch of producers or a critical producer? Was there some kind of policy change (e.g. limiting exports, forbidding use of a product, restricting feedstock)? Was there a production outage, was there a change in the weather outlook? Did future grain prices increase which implies an in increase in total grain and fertilizer demand? Is rail or truck supply limited? Are international vessel freights rising or sinking?
I could go on for another 500 words but you see one or two things and seem certain they're related. You don't have the information to understand the global markets but I suspect you are busy with other stuff and don't have 8-12 hours a day to learn about them. When I tell this stuff to farmers they tell me they don't care what's happening in Timbuck2, what matters is what's happening on Main Street in their town! That's when I know they have no chance of understanding why the fertilizer market move the way they do. The US uses tens of millions of tons of fertilizer and what happens in one small area is just that....small.
As I said before, it's logical that grain prices and fertilizer prices move in the same direction over time. Whenever you need more of a commodity the last tons typically come from the highest cost producer. It's the same in grain and fertilizer but the purity of that concept is complicated by the fact that consumers and producers are spaced out all over the place and they don't always buy from the most logical source. The more buyers try to buy faster or slower than producers keep producing there will be stuff that's less logical/optimal. If sellers choose to sell/push faster or harder than buyers want to buy it pushes prices lower to the point they don't want to sell any more. I'm sure you feel the opposite is true, that producers hold prices until they're high. Sometimes it works but with time on their side buyers can hold out for a fair price from another seller. Prices move up and down for these reasons as well as another 100. I spend a bunch of time trying to understand where demand and supply meet and what that price should be. The market doesn't really care what I or producers think, it goes it's own way. Sometimes sellers screw up and sell too cheap and sometimes they do better than they should. Over time I use the data I have and I find it an extremely good predictor of price but only inside a bubble since stuff is changing every day. that's why you need to be in it every day and understand global fertilizer if you're going to understand whether or not your local price is fair. | |
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Anhydrous verses UAN and Urea
