What did the record 2008 fertilizer prices do to fertilizer demand?

Vroomen first touched on the U.S. market.

“The U.S. economy was in pretty rough shape. This impacts growers’ psychology, which impacts planting and input decisions...

“Corn prices received by farmers peaked in June 2008 and have dropped since. Fertilizer prices continued to rise and were slower to come down. … (The two) don’t move together one-for-one but generally move together. … In 2008/2009, there was a big divergence – we’d never seen a divergence like that in corn and fertilizer prices.”

While all the data isn’t in, forecasts show “a 16 to 17 percent drop in U.S. nutrient use in 2009. That’s with almost no change in acres of the major crops. The entire drop in demand was price induced. In other words, application rates fell dramatically.”

Overall, nitrogen saw a 6 to 8 percent drop in 2008/2009, phosphate a 25 to 29 percent drop and potash a 32 to 36 percent drop. “Total use of N, P, and K – about 18 million tons of nutrients in 2009 – will be the lowest level in the United States since 1975.”

The impact of higher prices led to the highest usage drops in South America. “We saw large drops in Argentina and Brazil. China was down for the first time in many years.”

Bucking the trend, India’s fertilizer use was still up. That’s largely because India has a subsidy program where the price of fertilizer is fixed.

“Overall, the world saw a 2 percent drop in nitrogen … a 12 percent drop in phosphate … and a 19 percent drop in potash.”

This drove down prices from their historic highs.

In the United States, in response to the drop in demand and lower prices, “nitrogen production fell by 8 percent and phosphate production fell by 24 percent. North American potash production fell by 36 percent (there are now only two U.S. domestic producers of potash, so the data is combined with Canadian figures).”

The impact of the drop in demand is also clear with import numbers where nitrogen imports fell by 24 percent and potash fell by 43 percent.