Size Matters
When it comes to granular fertilizer products and it’s pricing, it’s all about the particle size of the product components. As the trite cliché goes…size matters. Only in this instance, it’s the reverse logic, in that the smaller the product size, the more expensive the components are and, ultimately, so are the prices of the finished product. So let’s walk through the understanding on why smaller sized products don’t follow the same logic, or pricing, as standard sized products.
Market Size / Availability
As I’ve brought up many times before, our T&O industry is extremely small compared to “Mother Ag”. The fertilizer specifications for the agricultural industry are much less demanding than what we have for maintaining turfgrass at various heights of cuts. That’s precisely why the vast majority of raw material components come in “Ag grade”, which typically reach SGN 300+ size range…not exactly ideal for our industry.
Most of our industry’s “standard” size is currently running about SGN 200-250, depending on the component. During a typical year, there’s an ample supply of this size for all the major components of nitrogen, phosphates and potash. Over the past few years, however, there has been a significant reduction in companies who offer this size, as they have shifted to serving the increasing demand of the agricultural industry. This development has led to supply lines becoming tighter. Of course, this year has been anything but typical, ultimately leading to even further supply issues.
Keep in mind that I’m only talking about “standard” size components…so far.
Mini Sized (SGN 150) and Micro Size (SGN 80-100)
I’m sure you can imagine that with standard size components availability being tight, even smaller size components must be even worse than that. You would be correct.
Because our golf courses have fairways and tees being maintained at heights of ½” or less and our putting greens are being shaved down to .15” or less, the fertilizer products needed to feed them must be small enough to break down into the canopies of the turf to avoid being picked up or crushed by the regular mowing schedules. Unfortunately for us, these demanding specifications are almost exclusive to our industry. This translates, from a manufacturer’s perspective, at least, to a significantly lower annual requirement for these small sized components than standard sized components. All these reasons result in paying higher premium prices for the sized components.
Market Volatility
In terms of how a fluctuating market impacts standard sized components, it’s fairly straight forward and somewhat linear. As the market costs increase, it directly affects the price of a bag of fertilizer utilizing those components. The same thing happens, in reverse, when the market costs decrease. There’s obviously some time delay from when the costs change to when you will see the impact, but the causality is direct.
The same basic logic does not apply to smaller sized components due to the timing of production. Since we already know that the demand is so much less than standard sized components, most manufacturers schedule longer runs of these smaller size components to maximize efficiencies and free up their capability to run the standard size. This strategy buffers and insulates the market volatility of the smaller size components. So depending on when it was actually produced, a changing market cost does very little to impact the overall price of what you pay for a bag of fairway or greens grade fertilizer. This is exasperated when in times when the market fluctuations continue for an extended period of time…like we’re currently experiencing.
The Reality of It All
The market fluctuations will ease as we’re currently seeing in the last few weeks. You will see the prices of standard sized products also ease up and come down in price fairly soon. You should not expect to see the same action for fertilizer products that are smaller in size. Don’t get me wrong, they too will subside; it just takes a little longer.