Stupid butterflies - AprJun 2009
Getting ready for the new growing season
TFQ Editorial Staff
You already know that 2008 was the most expensive tobacco crop ever grown as input costs skyrocketed. We’ve all heard the stories from the oil industry where record barrel prices drove up the costs of all fuels, which in turn drove up the prices of everything—due to the increased costs of shipping, packaging, labor, blah, blah, blah. One of the main culprits, however, that jacked input costs up to $1.80 per pound (an increase of 20 percent from 2007) was fertilizer.
You’ve heard the term butterfly effect that is derived from chaos theory, which basically says a simple event in one place (such as a butterfly flapping its wings in a far-off land) can ripple and cause or change a larger, more complex event around the globe (such as altering the path of a tornado in Texas). In this case, the far-off “wing flap” was the threat of a global food shortage, as well as the very real food riots that ensued around the world. Because fertilizer is tied to about 60 percent of the world’s food production, the demand for it has risen sharply since 2001 with the quest for healthier living in developing counties—most notably China, India and Brazil. (The United States has also increased demand with its ethanol movement). Fertilizer went from being a plentiful growing tool just a few years ago to being an essential and costly commodity, one whose value increased 110 percent in one year thanks to the reported global food shortage.
The good news is that the prices of nitrogen, phosphorus and potassium—as well as the price of the natural gas needed to make ammonia—have all plummeted to their lowest levels in years. The bad news is that you probably won’t realize those savings until 2010 because the nutrients used to make this year’s products were purchased last fall before the prices crashed. So it cost manufacturers a lot to make the fertilizers you are now buying, and subsequently it’s costing you more as well.
On the bright side, the initial fear was that oil prices would remain high and U.S. economic woes would have input prices higher than last year’s; however, well-known agricultural economist Dr. Blake Brown recently said at the Southern Farm Show in Raleigh, N.C., that he expects input costs to dip slightly to $1.77 or $1.78 per pound. Not great, but certainly better than it could have been.
At the same show, Mel Ray, president of the Tobacco Growers Association of North Carolina, said he was “cautiously optimistic” about the 2009 growing season for tobacco farmers based on the decreasing costs of nitrogen, fuel and energy, and the fact that published contract prices haven’t been reduced as much as his organization feared (they should stay within 5 cents per pound).
Now all we need to do is get those butterflies to flap so it pushes some rain over the Southeast for a much-due “normal” weather season, and everyone will be OK.