Fertilizer Prices Likely to Remain Volatile Despite $500 Million Funding, Says Analyst Josh Linville
Fertilizer prices have certainly skyrocketed over the past few years, which is why the Biden administration and USDA in 2022 said they would provide federal funding to help increase fertilizer production here in the U.S.
“It’s good. We appreciate it. Unfortunately, I don’t think it’s going to have the effect they were hoping for,” says Josh Linville, Vice President and Wholesale Fertilizer Expert at StoneX.
In March 2022, USDA Secretary Tom Vilsack announced that $250 million of federal money would go to increase production of American-made fertilizer to bring down those prices. Last May, President Biden raised that amount to $500 million.
During a speech last Friday at Commodity Classic in Orlando, USDA Secretary Tom Vilsack announced the first $29 million in grant offers to independent businesses to produce more American-made fertilizer and lower prices.
“When Vilsack first made that announcement, $250 million dollars for a lot of people is a lot of money. Our industry kind of chuckled at it because when you look at it—to build a brand-new nitrogen production facility—you’re talking upwards of $4 billion to $6 billion in today’s dollars, so $250 million doesn’t really touch even the down payment on something like that. Moving it to $500 million—again, we appreciate it, but it doesn’t go far enough,” says Linville.
Throwing half-a-billion dollars of taxpayer money at the problem isn’t the best solution for bringing down fertilizer prices, according to Linville.
“What we need is less restrictions on using our own natural supplies to do that,” says Linville. “If people had a better sense that our political administrations are going to be friendly to this, we would put the investment here. The U.S. is a great place to build new nitrogen production—so is Canada. But when you don’t trust the outlook of the government, you get very reluctant on putting that kind of an investment in place where you might have more and more restrictions.”
Linville believes that fertilizer prices are likely to remain volatile for quite some time despite the federal funding.
I wish I was able to get on here and say guys just wait a little bit longer and prices are going back to the lowest prices we’ve seen the last half a decade “I wish I was able to get on here and say, ‘Guys, just wait a little bit longer and prices are going back to the lowest prices we’ve seen in the last half a decade.’ I don’t believe that’s the case unfortunately,” says Linville. “The good thing today is that grain values are still high. I don’t think it’s going to go anywhere, and it may not be as wild as what we’ve seen last two-and-a-half years, but we think volatility is going to stay in place.”
“Volatility breeds risk, but it also breeds a lot of opportunity. Watch for those opportunities. When you get a chance where you can buy your fertilizer and sell your grain and lock in a profit, that’s a good thing. If we get down the road and all of a sudden, we look back and say, ‘Oh, I’ve waited—I could have made a little bit more money on that decision,’ I will take that criticism because that means your worse decision was profitable. I like that—I will take that,” he says.
Linville adds that the relationship between fertilizer prices and grain prices are the best he’s seen in the past five-to-ten years.