Canadian farmers store fertilizer to fight dealers' pricing power

Fri Feb 27, 2015 1:28am EST
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By Rod Nickel

WINNIPEG, Manitoba (Reuters) - Canadian farmers are plowing profits from bumper crops into fertilizer storage facilities to mitigate the pricing power held by major retailers and producers.

   Having their own storage lets farmers buy nutrients more cheaply during the off-season and creates fewer transport bottlenecks in the spring planting season.

   Over time, the practice might erode the steep premiums farmers pay in the spring to retail businesses owned by Agrium Inc, Richardson International and Cargill Ltd [CARGIL.UL], while shifting distribution patterns of producers Potash Corp of Saskatchewan, Mosaic Co and CF Industries.

    The trend is part of a wider shift by North American farmers to gain more control over both costs and the prices they collect. In the U.S., farmers are building silos and bins to store grains and oilseeds until crop handlers entice them to sell.

    Canadian farmers produced record-large harvests of wheat and canola in 2013, boosting their net income to C$6.4 billion, the fourth straight year of gains, according to the most recent Statistics Canada data.

    After diammonium phosphate prices spiked in 2008 to $1,200 per tonne, compared with less than $500 a tonne today, Saskatchewan farmer Kevin Hruska spent about C$400,000 in 2010 to build storage for about 6,000 tonnes of blended fertilizer.

    "We want to store it all - we don't want to be held hostage by the logistics of springtime and the games the fertilizer companies play," said Hruska, who grows wheat and canola and uses about 6,500 tonnes of fertilizer a year on his sprawling 45,000 acre farm. "It gives you a lot of security knowing your fertilizer is in place out of season."

    The difference between harvest and spring fertilizer prices has been almost enough for farmers to pay the cost of storage within one season, said Lyndon Carlson, senior vice-president of marketing at Farm Credit Canada, the country's biggest agriculture lender.   Continued...