Tuesday, June 3, 2008
Fertilizer Beats Dollars
"At a time when food prices are soaring world-wide, so is the price of fertilizer, producing huge profits for leading fertilizer makers and stirring anger among farmers in the U.S. and India. ... In April, farmers paid 65% more for fertilizer than they did a year earlier, according the the U.S. Department of Agriculture. ... Food prices have soared in recent months as the world's growing demand for grain, which has exceeded production for much of this decade, has reduced stockpiles to extremely low levels. That's helped to draw attention to farm-production costs including fertilizer. ... On Friday, Sen. Byron L. Dorgan, a North Dakota Democrat, said he is asking the Federal Trade Commission to scrutinize the industry's business practices. ... Major fertilizer producers deny any allegations of gouging. They say they are simply raising prices to reflect tight supplies and growing demand after years of relatively low prices. ... In an interview Monday, [Potash's Bill] Doyle called recent complaints about prices an emotional reaction. Fertilizer prices began rising in earnest about a year ago after a nearly decade long period of stability. 'People don't like higher prices,' Mr. Doyle said. But 'you never hear from anyone complaining when prices are low'," WSJ, 27 May 2008.
Note, prices began rising about a year ago. Interesting. Like in any other business, price drives cost. As the price of commodities increases, their factor inputs increase. Fertilizer is up 65% in the last year, a year ago the euro was $1.34, now it's $1.55, so the euro price of fertilizer, rose 42% Did fertilizer rise 42% or 65%?