Crop and agriculture economics
The fertilizer business is driven by supply and demand. When demand for fertilizers is on the rise, share prices will often rise. But when demand for fertilizers is falling, it can negatively affect share prices. Demand is largely driven by crop economics. When people think of crop economics, the first thing that comes to mind is crop prices.
Crop prices have fallen quite substantially this year as record planted acreage and good growing conditions have resulted in record crop outputs. Since the USDA “maintained” its estimate for a record production year in summer 2013, crop prices have been sliding. While a late summer heat lasted into the fall, it nonetheless helped crops grow. Droughts were minor and more localized compared to the national drought we saw in 2012 that sent crop prices soaring.
Why corn prices have fallen
Farmers continue to estimate where corn prices would be in 2014. At the moment, corn prices stand at around $4.25 per bushel. Should corn prices fall, the fertilizer affordability story would be gone. But there are several reasons why corn price has likely hit a bottom.
© 2013 Market Realist, Inc.
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