Rabobank in business

22-7-2008 | Other news

As the cost of producing food has risen, farmers are facing even higher costs for fertilisers. Rabobank analyst Erin FitzPatrick delves into why the cost of fertiliser has risen, in some cases, as much as 300 percent, and how farmers can adjust.

Much of this increase in cost is because supply cannot keep up with demand. In a new Rabobank podcast, FitzPatrick said, “Countries such as China and India are increasingly using more fertiliser and the supplies coming on line to meet this demand just have not grown at the same pace.” 

Depending on the crop
However, not all farmers are affected equally depending on the crops they grow. “U.S. corn farmers, soy farmers and wheat farmers have all seen the price they are receiving for their crops go up more than enough to substantiate the fertiliser increases,” said FitzPatrick.  

Making adjustments
To deal with these rising costs farmers and fertiliser producers are taking action. Producers are increasing capacity, expanding mines and moving closer to sources of natural gas. Farmers, on the other hand, won’t stop using fertilisers because all the nutrients they contain are needed for crop life.  But, they will make adjustments. 

Becoming more efficient
For example, farmers will focus on being more efficient. “They are going to use soil testing, variable rate application, intensify their management and re-evaluate their crop rotation,” said FitzPatrick.

Purchasing strategies
Because costs are not likely to drop, farmers are beginning to take a more long-term approach by making fertiliser purchases part of their business strategies. Some are purchasing fertilisers year-round rather than seasonally, pre-purchasing fertilisers or forward contracting. 

The full podcast is available online at www.RabobankAmerica.com/Rabocast.