(Resource News International) — Frustrated by domestic fertilizer prices, producers and producer groups continue to take it upon themselves to seek out cheaper alternatives, such as from the U.S. and overseas.
“There have already been a number of producer groups and some private individuals who have successfully and unsuccessfully sought out cheaper foreign fertilizer to offset the high-priced Canadian product,” said Ian Wishart, a Portage la Prairie, Man. farmer and president of Keystone Agricultural Producers.
Fertilizer manufacturers in Canada seem to have more of an eye on their share values, as opposed to the fertilizer supply/demand situation, he said.
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There are lot of high-priced fertilizers in storage at retail outlets in Western Canada which farmers are “absolutely refusing to pay up for,” Wishart said. “As a result, these companies have been able to keep their share values up but at the expense of their fertilizer sales which is not a good market response but rather wishful thinking.”
Farmers in Canada have indeed been backing away from making any fall fertilizer purchases, said Mike Jubinville, an analyst with the advisory service ProFarmer Canada in Winnipeg.
“Nobody at this time wants to take a chance on fertilizer even though the risk of higher prices is still there,” he said.
Jubinville felt that fertilizer prices are still astronomically high, but also that they have begun to roll over somewhat.
“To a certain extent there has been some sort of demand destruction in the Canadian fertilizer sector because of the high prices,” he said.
The fact that prices for a number of commodities, particularly canola which is a high-input crop to grow, have declined significantly were also a factor in the refusal to buy these products, Wishart said.
The cash price for canola has now dropped below $8 a bushel in Western Canada, the value which is considered a break-even point for producers, he noted.
Cheap product
A Saskatoon-based producer group, Farmers of North America (FNA), has been one of the groups more successful at bringing in cheaper fertilizers from outside Canada.
“The importance of importing fertilizer from outside of Canada is to offer a competitive product and lower the price paid by producers,” said Glenn Caleval, an executive consultant and spokesman for FNA.
FNA is a buyers’ group for farmers with 8,000 members across Canada. It seeks out competitive pricing for ag inputs in Canada. A handful of U.S. producers is also included in the membership.
Canadian farmers are tired of seeing Canadian fertilizer companies report record earnings at their expense, Caleval said, especially while there is cheap product available in the U.S. and offshore.
“These companies are not even shy about not offering any kind of better price to producers at present they just want to maximize whatever profit they can,” he said.
FNA currently imports three kinds of fertilizers for its members, he said. The fertilizers are brought in through ports at Montreal, Vancouver and Churchill, Man.
Caleval was reluctant to indicate just how much cheaper its fertilizer imports were, but indicated that three years ago, when the group first brought in product, the price delivered to the producer on farm in Saskatchewan was $50 to $60 per tonne lower.
“The price of the fertilizer imports have improved since that time,” he said.
Caleval also noted fertilizers have been brought in through the Port of Churchill from Russia. “We work with the Canadian Wheat Board to make sure there is a return cargo for the vessel coming in,” he said of ships delivering to Churchill, a seasonal Hudson Bay port usually used to export CWB grains.
Fertilizer was also brought in through Montreal that’s currently being shipped out to producers in Western Canada, and is cheaper than what local fertilizer dealers are selling the product for, Caleval said.
Caleval and Wishart noted some private individuals who were also bringing in cheaper fertilizer alternatives.
Due diligence
That said, “there is a danger of being told one thing and later discovering that the deal was too good to be true,” Caleval warned. “It’s important for the groups and individuals who are considering these imports to do the due diligence.”
A group of producers from Alberta recently learned that lesson, he said. “This group kept seeing these cheap prices in various parts of Russia and figured they would give it a try,” he said.
“However, there were problems with the quality of the product, there were also currency transition issues, they had to get shipping, then had to get the product transported to a port to be loaded, they had to get a vessel, then get that ship across the ocean and by the time it would have been delivered to the producer in Western Canada there was definitely not the price advantage that was first claimed.”
The plan, as a result, fizzled out, Caleval said.
He did not blame the group for trying and gave it credit for the effort, as producers have to do something when they face excessive costs.
Regular channels
Some cheaper fertilizers have started coming through the regular channels, according to Kevin Hursh with Hursh Consulting and Communications in Saskatoon.
Some distributors didn’t buy as much fertilizer at the higher price levels and they now have an advantage, he said. Other organizations are biting the bullet and lowering prices to compete.
“Urea that was over $900 a tonne is now $600 or less at many retailers,” he said. “Phosphate has also been cut to around $895 a tonne from over $1,300.”
