December 11, 2008
Fed up with the high cost of fertilisers, producers have taken it upon themselves to seek out cheaper alternatives including importing products from the US and overseas, industry sources said.
"There have already been a number of producer groups and some private individuals who have successfully and unsuccessfully sought out cheaper foreign fertiliser to offset the high-priced Canadian product," said Ian Wishart, president of the Manitoba-based Keystone Agricultural Producers.
Producers in Canada indeed have been backing away from making fall fertiliser purchases, said Mike Jubinville, an analyst with ProFarmer Canada, a farmer advisory service.
"Nobody at this time wants to take a chance on fertiliser, even though the risk of higher prices is still there," he said.
"To a certain extent there has been some sort of demand destruction in the Canadian fertiliser sector because of the high prices," he said.
Wishart said farmers are also refusing to buy fertiliser because of the falling prices for a number of crops, including canola, which is fertiliser-intensive.
The cash price for canola has now dropped below C$8 a bushel in western Canada, the value considered a break-even point for producers, Wishart pointed out.
A Canadian-based producer group called Farmers for North America, or FNA, has been successful at bringing in cheaper-priced fertilisers from outside Canada.
Glenn Caleval, an executive consultant and official spokesman for FNA, said Canadian producers are tired of seeing Canadian fertiliser companies report record earnings at their expense, especially while there is cheap product available in the US and offshore.
Calgary-based Agrium Inc. (AGU) in November announced that net earnings for the third-quarter ended September 30 totalled US$367 million, more than four times the previous quarter record achieved in 2004 and more than seven times above the US$51 million net earnings during the same quarter in 2007.
Net earnings for the first nine months of the year were a record of US$1.198 billion, more than four times the previous record of US$269 million, set in 2007.
Calveval and Wishart said some private individuals were also bringing in cheaper fertiliser alternatives.
"There is a danger of being told one thing and later discovering that the deal was too good to be true," Caleval said in a warning to producers. "It's important for the groups and individuals who are considering these imports to do the due diligence."
Some cheaper fertilisers have started coming through the regular channels, according to Kevin Hursh, with Hursh Consulting and Communications Inc., in Saskatoon, Saskatchewan.
He noted that some distributors didn't buy as much fertiliser at the high price levels and they now have an advantage. Other organizations are biting the bullet and lowering prices to compete.