Wednesday, January 28, 2009

Friends don't let friends...

Buy $900 DAP.  I'm trying to find a marginally acceptable way out of the fertilizer pricing mess we seem to have found ourselves in. I like my dealer and I respect the right of the fertilizer industry to make business plans for their own ends. But it has become glaringly obvious what the industry wants to force customers to do: underwrite their unfortunate business decisions.

As the boys at Purdue delicately put it:
Fertilizer markets are adjusting now to a dramatically different economic situation after prices reached 
unprecedented levels last year.  With prices in flux, the wholesale prices paid by agricultural retailers vary 
dramatically, depending greatly on the fertilizer source and when they were purchased.  Correspondingly, 
retail fertilizer prices can be much different from dealer to dealer this year. As in any year crop producers 
should check pricing with more than one dealer, but also especially this year get a good feel for the assurance 
of supply when you will need fertilizer this spring.  Also, carefully weigh the value and possible future benefits 
of maintaining a good working relationship with your agricultural supplier.  [More]
"Somebody, by God, is going to buy this overpriced inventory of mine", they seem to be demanding. Dire warning of yield drops and inability to get product in time are transparent scare tactics.  And they know a few good-hearted souls will honor our previous contracts and miscalculate that our share lease at least splits the pain with some hapless landlord.

But what never seems to cross the minds in the boardroom is farmers know there is a sale coming this summer. The presumption we are slaves to habit and will pony up because we always have may be partially right, but it will not include this producer.  They seem to forget I have my own bad decisions to rectify. I'm not in the mood to solve their problem.

I value my relationship with my retailer, and I suspect he is the sacrificial pawn in his company's effort to make regional and local dealers be the fall-guys for corporate misjudgments. And I will honor my 2008 contracts and prepays for NH3 with a pretend smile on my face.

But someone else can overpay for P & K this spring.  I think I can apply twice as much this fall for the same money.  In fact, I wonder if I can prepay it right now.

I have seen the earning guidance given by fertilizer manufacturers desperate to look profitable in front of extremely skeptical stock analysts.  (Do they think we can't find this stuff on the Internet?) And we all have read/heard the stories of same-county competitors $500+ apart because only one was choking on overpriced inventory.

This is not the year to go into any market place with "demands".  Not for producers.  Not for fertilizer sellers.  Conflict with customers is soooo 2008.


Anonymous said...

John..we have 4 fertilizer dealers in close proximity too our farms (10 miles)...3 "big boys and 1 co-op" ...pricing does vary a lot already this winter ,,dealer we generally buy majority from is close by (1/2 mile) BUT I remember last september that they gave me 1 day too confirm fert. order and it had too be paid in full that day or it was going too cost $200 more next day,,so fairness to all we will tender out all fertilizer -chemicals in late march and cherry pick the best prices,,our #1 goal this year is survival...when you look at corn all the 2 biggest buyers are losing money -ethanol and livestock--so is corn too high or there products too cheap--I am sure the market place will give us this answer luck too all-kevin

Anonymous said...


Glad you and many others are waking up to the reality of the last three years. It became apparent to me three years ago that my fertilizer dealer is no friend of mine. With the continued early demand for prepay, the smaller and smaller time frame in which I have to make a decision, it became painfully obvious that my dealer was using me as a bank. Plus their “discounting” to other larger farmers that they said they don’t do. Come now boys, you all know we talk at the coffee shop. So middle of last year, we started shopping. And man what a difference we found. $300-$400 a ton on Potash in Mid June that we borrowed the money and paid for all our 09 and 10 Potash then and spread it after the wheat was cut.

Fertilizer is a bulk commodity. And to that end, fertilizer dealers are just another tool in my shed, to be bought and sold as needed, when they become wore out and to expensive to repair they will be traded or placed in the fence row to rust. Or when the time is right hooked up and used.

I now live by this quote from a farm advisor: Your fertilizer dealer is not a non profit or charitable organization, he does not have your best interest at heart, he is not your friend.


John Phipps said...

kevin, GR:

Gentlemen, your responses are perfectly reasonable, and I find no error in your logic save this: if your farm is multi-generational, what are the long-term upsides here?

I do not have the advantage of multiple sources, and I have relied upon my dealer to adjust to unexpected events for several years. While I reserve the right to buy nothing because of the company marketing strategy, I have offered them an alternative number, and I have carefully avoided getting in anybody's face.

Talk to some livestock operators before assuming the moral high ground on this issue. You might be surprised how similar their anger is over ethanol.

Right now, between the global economy and our own sector, fear is awash in most minds. This triggers anger to prepare for confrontation, and not much good can from that.

Every chance you have, work to rebuild trust. Make sound business decisions, but I would suggest working overtime to avoid ultimatums (ultimata?) or personalizing your communications.

For example GR, are you excited about being "just another tool" in landowners sheds?

Some of us had to learn this lesson the hard way. E-bay works well for one-time transactions, but nor for rooted commerce.

Regardless, thanks for your articulate comments.

Anonymous said...

John,,relationship building is great thing to have-achieve...We try to be as diplomatic as possible with our merchants and do the best for our customers-buyers also...problem we have is in this low margin business we have too shop,,on chemicals we can often buy from an "out of the area" supplier for 25% less than local dealer ,, causes some hard feelings ,but I see the fleet of new pick-ups they drive come from over 100 miles away.....I just detest having to order and pay for all our seed and lots of inputs before we even have our present crop sold ,,if all pricing was equal and I needed or required there services I would buy everything "next door" ...truth is I can't afford too...surprised by the number of producers who buy everything at same place year after year and never even know the price until they get there statement.... maybe i am just upset that land that sold for $3k and acre 2 yrs. ago is now bringing $6k.......livestock has been a train wreck and crops are heading there fast...sorry for the ramblings-kevin

Anonymous said...


I concur with your excellent response. One needs to be cautious in using a short term confrontation at the expense of long term relationships and the potential of future infrastructure breakdown. We are all in this together.

Ron in IA