Rabobank Analyst Explores the Increasing Cost of Fertilizer in New Podcast

Posted: Tuesday, July 22, 2008 8:43 pm

NEW YORK, July 22 /PRNewswire/ -– As the cost of producing food has risen, farmers are facing even higher costs for fertilizers according to a new Rabobank podcast. In the podcast, Analyst Erin FitzPatrick with Rabobank’s Food & Agribusiness Research and Advisory department delves into why the cost of fertilizer has risen, in some cases, as much as 300 percent. (The full podcast is available online at www.RabobankAmerica.com/Rabocast.) Much of this increase in cost is because supply cannot keep up with demand. FitzPatrick said, “Countries such as China and India are increasingly using more fertilizer and the supplies coming on line to meet this demand just have not grown at the same pace.” (This information begins at 1:46 in the podcast.) It is difficult to match demand because the components of fertilizer are costly and take a great deal of time to produce. Nitrogen, for example, relies heavily on natural gas, which has gone up, and phosphorous and potash come from mines that cannot be developed quickly. And, as fertilizer becomes more of a global commodity, the cost of transportation around the world is linked to the rising cost of oil. 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 fertilizer increases,” said FitzPatrick. “Growers, of, for example, fruits, vegetables, cocoa, commodities that haven’t seen the price increases are going to be more sensitive.” (This information begins at 2:41 in the podcast.) To deal with these rising costs farmers and fertilizer 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 fertilizers because all the nutrients they contain are needed for crop life. But, they will make adjustments. 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. (This information begins at 4:22 in the podcast.) Because costs are not likely to drop, farmers are beginning to take a more long-term approach by making fertilizer purchases part of their business strategies. Some are purchasing fertilizers year-round rather than seasonally, pre-purchasing fertilizers or forward contracting. The premier bank to the global food and agriculture industry, Rabobank is a global financial services leader providing institutional and retail banking and agricultural finance solutions in key markets around the world. From its century-old roots in the Netherlands, Rabobank has grown into one of the 25 largest banks worldwide, with over $800 billion in total assets and operations in over 35 countries. Rabobank is the only private bank in the world with a triple A credit rating from both Standard & Poor’s and Moody’s, and is ranked among the world’s safest banks. In the Americas, Rabobank (www.RabobankAmerica.com) is a leading financial partner to the entire American food and agribusiness industry and is a specialist in sophisticated, customer-driven solutions in the Global Financial Markets and Corporate Finance arenas. Rabobank also provides retail and commercial banking services in California; leasing; and real estate lending, operating loans, input financing and crop insurance to American agricultural producers, input suppliers and agricultural manufacturers. Posted 7.22.08