By Terry Meagher

You can’t blame farmers for balking after prices of fertilizer rose 128 per cent over this past year? One farmer put off buying fertilizer for his Timothy field until another time. If you’re going to pay $90 an acre to fertilize a hay field and the projected return is $45 per acre, there’s no economic reason to use fertilizer, he says. Corn farmers bought fertilizer but less of it. Some changed crop intentions to lower their cost of fertilizer.

But you can’t blame local fertilizer dealerships either. Steve Gardener, vice president of Harvex, near Kemptville, said local dealers have a buying strategy just as farmers do for selling their corn crop. They buy their fertilizer in stages, hoping to even out the cost at as low a level as possible.

Historically, fertilizer prices in July are at a yearly low and that’s when dealers put in their main bids. The system worked for years. But it didn’t work last year. Fertilizer prices followed oil prices to record highs, but when the oil market plummeted fertilizer prices remained high, leaving local dealers with highly priced inventories they couldn’t move.

So where does the blame lie? Probably with the handful of fertilizer manufacturers who dominate the market. The Honourable Member from Prince Albert, Randy Hoback, speaking before the Standing Committee on Agriculture on high fertilizer prices, said fertilizer executives told dealers to book now or go without in the spring. They kept the price up artificially until after Christmas and producers began to go elsewhere.

Before the 2009 season, fertilizer companies in Canada produced more than 25 million tonnes of fertilizer annually, exporting 20 million tonnes to over 70 countries. The Canadian farmer was spending about $2.7 billion annually on fertilizer.

How much the farmer boycott of fertilizer hurt the industry isn’t public yet. But in the first quarter of this year, Potash Corporation of Saskatchewan announced that earnings had dropped from $566 million to $308 million. The $308 million in earnings were achieved largely because of higher pricing. Chief Executive Officer Bill Doyle when he saw fertilizer wasn’t moving temporarily shut down some mines causing the average price to double. Third quarter profits in 2008 were five times higher than the previous year.

In 2007, Doyle had the highest compensation package of any CEO in Canada, $320.4 million.

The Standing Committee on Agriculture has recommended that Agriculture and Agri-Food Canada analyze the level of concentration in Canada. But previous studies into price fixing have changed very little. When producer beef prices hit rock bottom in 2003, though retail prices held up, the packing plants were scolded but little else happened.

None of what has happened is good for the local economy, for farmers or for fertilizer dealers. Farming in Ontario has become an industry where farmers depend on the expertise of companies providing the equipment and crop inputs. If the industry wishes to remain viable, it must maintain its infrastructure. Suppliers like Harvex provide a superb service and they invest to remain competitive. Harvex has spent $1 million dollars for a blending plant, for example.

Suppliers have no assistance programs. They win or lose in the marketplace. With losses this year mounting and with receivables still outstanding from three-years ago, some dealers are on the edge.

You don’t need a magic ball to see that a few more years like this one will lead to the endangerment of essential infra-structure. Farm leaders need to take hold of this problem and head off what could become catastrophic.