Synthetic Fertilizer Prices Likely to Rise Sharply in 2011
In what should be a major boon to the organic lawn care movement, prices of synthetic fertilizers are expected to rise sharply in 2011 according to numerous industry sources.
Many components for synthetic fertilizers and pesticides are manufactured from natural gas and oil. With prices of both of those commodities increasing in recent months — with no down turn expected anytime soon — the impact will be felt dramatically at the garden center next year. The other factor is the mining of potash, the base stock of potassium in fertilizers, which as also been subject to wild volatility in pricing.
In early 2008, manufacturers were paying $150 a ton for potash before it rose, almost overnight, to nearly $1,000. The financial crash of 2009 brought levels back down, but prices now are hovering at about $370 a ton and expected to crest at $500 per ton next year.
Overall, some distributors and manufacturers are telling their retailers to expect increases as much as three-fold above levels in the spring of 2010. Trade journals are also warning their readers to buy now, or beware.
“Hints of higher fertilizer prices are beginning to circulate in the wake of the big grain market rally over the last week,” according to an industry trade journal known as Farm Futures on Oct. 11. “Perhaps the best short-term gauge of the market is the price of fertilizer company stocks, which shot up after USDA bullish corn estimates.”
“There has been a ton of interest in anything related to fertilizers,” said Elvis Picardo, analyst and strategist at Global Securities in Vancouver, who also noted the increase in the stock price of some of the largest fertilizer companies in the world.
In the lawn and garden sector, the stock prices for Scotts Miracle Gro are safely back above $50 per share this fall after crashing as low as the $13 range in 2009. Even so, Scotts — by far the largest player in the home lawn and garden marketplace with more than 50 percent of the market share — is making some major bets on organic products going forward.
“Scotts knows two things,” said a friend of mine inside the company in Marysville, Ohio. “When the price is equal or greater for chemicals compared to organics, a vast percentage of customers will pick the organic because of the perceived safety issues. They also know that more and more people each year are buying the organic bag, box or bottle simply because it is organic no matter what the price. For those customers, perceived safety is the only value proposition in their decision process.”
So while increased oil and gas prices mean higher prices for everything — and it bites us in the pocketbook as much as anyone — we can only celebrate the forces that make chemical fertilizers more expensive. Consumers will take a look at sustainable, renewable organic products the same way they favor hybrid vehicles and alternative energy. As much as it hurts financially in the short term, the long term is far better for the planet.