Today's Fertilizer Market Is Like a Game of Jenga: Part Four- Non-Commodity Factors

This is the fourth and final part of a weekly, four-part series from LebanonTurf on the current state and forecast of the turf and ornamental fertilizer market.

Part Four – Non-Commodity Factors

In the last three sections, we’ve covered all the main fertilizer commodities and how each country, including our own, are navigating the unique supply and demand challenges that are impacting today’s fertilizer market.  Yet, that’s only one part of the overall dynamic that is affecting the price per bag in the T&O world.  Yes, raw material costs are a large portion of the collective elements that have been driving up costs, but there are multiple other associated costs that have also been increasing that heavily contribute as well.  In this last section, we’re going to take a look at these non-commodity related factors which will continue to strongly influence and shape the fertilizer market in 2023.

Freight / Transportation

The movement of raw materials and finished fertilizer products has always been a critical piece of the Jenga game.  Up until the pandemic, the transportation industry was extremely reliable in both service and costs, making budgeting for it fairly straightforward.  When the pandemic ensued, both of those aspects quickly changed for every industry.  The supply chain became the focus of the news media to an extent never seen before.  Coverage of empty shelves and ships piling up in the ports became as commonplace as sports scores and weather reports.  While the latest news cycles have moved on to the next topic, many lingering issues continue to distress the transport freight industry to this day; many of which are directly impacting the fertilizer market.

Ocean Freight Liners

As we’ve meticulously covered during this series, commodity fertilizer components are manufactured or mined throughout the globe, which means ocean liners are the first part of the freight equation that are helping drive up costs and, unfortunately, causing disruptions in the supply chain.  In full disclosure, the ocean freight industry is incredibly complex with countless variables that are dependent on port of origin, route directions, and 100 other reasons we can’t sufficiently cover.  We will be relaying information and forecasts based on general trends and assumptions on the industry outlook.

Today’s cargo ships can hold around 24,000 containers, which is both good and bad.  On one hand, they can transport an enormous number of products at a time.  On the other hand, when there are disruptions, the impact is simultaneously felt by businesses across multiple industries.  It’s this abundance of disruptions in the supply chain that have obviously held everyone’s attention.  However, the current situation is not permanent, and the pandemic-induced bottlenecks in the system will eventually work themselves out.  These bottlenecks have been caused by a variety of factors such as major surges in demand, port closures, blockage of the Suez Canal, shortages of trucks and chassis, and a shortage of labor due to the pandemic.  Interestingly, global demand in 2021 was only 5.5% higher than in 2019.  This means that the number of ships and containers in the world is not a major problem.  The major problem is the congestion in and around the ports that are tying up these assets for far too long.  As these port logistical problems gradually get resolved, operations will return to a normal level.

This is good news, as our industry is heavily reliant on these ships for both raw material nutrients and pesticide techs, in addition to other associated components.  Back in early spring, we directly experienced this interruption when several key herbicide active ingredients were out of stock due to shipping delays.  Most active ingredients are not produced domestically and, even if they are, almost all require solvents or additives that come from overseas.    

In terms of shipping costs, current spot rates are being dictated by the physical shortage of capacity due to the previously mentioned bottlenecks.  As this improves, spot rates will start dropping.  Although still relatively high, this demand is predicted to dramatically decrease shipping costs in the first quarter of 2023.  However, with another wave of inflation looming, it’s unknown how much of an offset it will create.

River Barges

River barges have been around since the Industrial Revolution, but their use has seen quite a decline in recent years due to an increasingly demanding society.  The primary reason river barges haven’t experienced complete extinction is because they can successfully transport bulk items, like fertilizer commodities, at a lower cost than other modes of transportation.  Farmers rely on these barges in the spring to deliver fertilizer from the ports in NOLA to the Corn Belt region of the midwestern U.S. via the Mississippi River.  They also depend on these same barges to deliver their crops back to NOLA for exportation in the fall.  The capacity of the larger barges reaches up to 2,700 tons, making their use economical and typically reliable.

Last month, due to the severe Midwest drought, the Mississippi River recorded its lowest water levels in over a decade, resulting in a complete closure of the vital channel to barge traffic.  In response, the Army Corps of Engineers has been forced to dredge portions of the river in an attempt to deepen channels and get barge traffic moving again.  The Coast Guard reported that, at its worst, there were 144 vessels and 2,253 barges queued up and waiting to get through two stretches of the river where traffic has been halted.

When barges did start moving again, they were forced to carry as much as 20% less cargo than normal so as not to ride too deep in the water.  And rather than a single vessel moving between 30 to 40 barges at one time as they normally would, they were forced to move no more than 25 barges on each trip due to the narrower channels.  This combination of fewer barges per trip, and less cargo per barge, cut the capacity of barges moving on the river by about 50%, which sent the rates that shippers are paying soaring to record levels.

While these closures are likely a temporary issue that can be overcome, they’ve caused a massive tie-up in the country’s already struggling supply chains.  Should these stoppages and limitations persist, they will impact the farmer’s future plans for their fertilizer purchases, directly affecting the supply and demand paradigm extensively discussed throughout this article series.

Trucking Industry

When most of us talk about “freight”, it’s the trucking industry that we’re referencing since they dominate how our market moves around product.  Over the past few years, the U.S. trucking industry has experienced ups and downs in multiple capacities, all of which have impacted and morphed the industry into how it currently operates.  With freight costs now commanding a larger slice of our T&O market’s operating budgets, let’s look at some of the trends likely to surface in the coming year to see how they would impact the ability to manage our facilities.

Without a doubt the largest concern in the trucking industry is the cost of diesel fuel.  Fuel costs have only risen because of the limited nature of this energy source.  Currently the average price per gallon is still above $5.00, well above last year’s price of $3.35.  Industry experts agree that some price decrease is expected, however the estimate is that it will not fall below $4.25.  Escalating gas prices are stressing trucking companies, creating immense pressure to complete jobs while staying financially viable.  Carriers faced with these challenges are forced to evaluate their everyday budgets and ventures.  In many cases, carriers are picking up more local jobs, doubling up on their workload or are working overtime to meet business obligations.

Where possible, trucking companies are adding fuel surcharges to offset the financial strain of increasing diesel prices.  They must fill tanks to deliver orders; this tactic alleviates some gas pump concerns.  However, carriers with signed contracts must consider other options, as their agreements prohibit such modifications.  Instead, these carriers must evaluate their overall budget to find cuts in other areas, such as maintenance practices and overhead costs.  Unfortunately, many of these companies can’t remain viable under this high-cost environment.

During the past year, several large and small carrier companies have closed their doors due to harsh market conditions.  Currently, at least 3,000 truckers are unemployed due to the closing down of these companies, leading to a growing number of unemployed drivers.  One of the reasons for this is the shortage in the movement of goods.  Retail companies, one of the main driving forces in the entire trucking industry, are moving fewer goods from one place to another, causing many trucking companies to fold simply because of a lack of work.  The trend is not likely to change in the coming year unless there is a large spike in the retail industry as a while, and a significant increase in freight flow develops.  Alternatively, rather than close their carrier business, many companies are choosing to go down a different route and merge with other companies.  Many trucking companies will likely move in this direction in 2023 if the market doesn’t improve or if trucking companies have no other option.  

The outlook for the trucking industry isn’t overly optimistic as it struggles to find balance in today’s expense heavy economy.  While it appears that there is little concern in terms of securing loads with carriers, the greater threat is what the shipping rates will be.  We’ve been experiencing higher freight rates for quite some time, and it certainly appears that this trend will continue throughout 2023 and beyond.

Collateral Materials

Until now we’ve mainly focused on nutrient components, but we’re going to shift gears and look at very industry-specific factors for straight fertilizer and combination fertilizer products that will directly influence the price per bag in 2023.

Active Ingredients

Combination fertilizer products encompass a considerable amount of the T&O market.  Pre-emergent, post emergent and insecticide chemical techs combined with fertilizer have proven themselves as both efficient and highly effective.  The costs of these techs are managed by the parent chemical company that developed, maintains, and supplies them to fertilizer manufacturers for production.

The overall availability of chemical techs for 2023 is best described as “good, but tight”.  While somewhat innocuous, what it means is that chemical companies have indicated that forecasted orders taken during their EOP program can be reliably met.  However, any additional orders beyond that EOP timing that have not been forecasted, may be difficult to provide.  This indicates that theses chemical companies are not going to be stocking extra tech in their warehouses, most likely due to the higher costs they possess because of supply chain issues.  In essence, they are simply hedging their bets that tech costs will be going down in the future and don’t want to have high-priced inventory sitting around. 

MCPP is the lone exception when it comes to availability; it will be very tight.  Combination products with Trimec® and other MCPP products could see delays for those customers who wait until in-season to buy.  Additionally, since supply will be short, it’s reasonable to believe that prices will also increase.

Regarding updated costing of the chemical techs in 2023; taken across each category, the average cost increase was approximately 5% to 6%, with some outliers being smaller and larger.  This rate is only a slightly higher increase than what it would be in a normal year.  However, following the availability logic from above, should it become necessary for fertilizer manufacturers to purchase additional tech during the season, they will absolutely be paying a higher price.  If possible, it would be a wise strategy to order combination products as early as possible to help safeguard from this type of extra cost surcharge.

Inert Components

For a variety of different functional reasons, there are always non-nutrient components that are included in every fertilizer and combination fertilizer bag.  Often overlooked, these are the components that perform critical roles in helping ensure the overall quality and required efficacy of the bagged product.  Like nutrient components, the costs of these elements have a direct impact on the final bag price.

Limestone, both dolomitic and calcitic, are almost always included in product formulas.  One of the main reasons why these are added is to help make hitting the target application rate easier and safer.  Dolomitic limestone, a combination of calcium carbonate and magnesium carbonate, serves two purposes in the growing medium.  Primarily, it neutralizes acids in the soil and provides some magnesium and calcium for plant uptake.  Calcitic limestone, pure calcium carbonate, also neutralizes acids while providing some calcium, but almost no magnesium.  Finally, as fertilizer requests for lower NPK analysis continue to expand, these materials help fill the volume of the bag.

Costs for limestone are relatively low comparatively but have experienced similar increases to other components over the past year as well.  A fair estimate on the actual increase is likely around one half of a cent per pound, yet this can vary based on the quarry the limestone is mined from, as well as the distance to the manufacturing plant.  The increased freight factors discussed above plays a major role in the landed costs for fertilizer producers.

Another very important component in every bag of fertilizer are dust suppressants.  As you probably guessed, dust suppressants help control the inherent dustiness of a product that created by blending components that have different rigidity.  They also help control dust from product degradation of finished bag products.  Without this component, most products would likely be unacceptably dusty during application.  Due to dust suppressants being used across multiple industries, the costs of this component have seen an average increase of 15% from last year.

Anti-caking agents are another essential, yet frequently overlooked, component of fertilizer products.  If you’ve ever opened a fertilizer bag and saw some clumps and chunks of particles sticking together, you’ve seen what are called “agglomerates”, which are the result of “caking.”  The underlying reason why caking happens is because of a physical reaction that occur between the contact points of the individual particles in the bag, which are triggered by humidity and temperature. Caking always happens after the product has been produced and put into bags.  Anti-caking agents, such as attaclay, prevents the formation of these agglomerates.  While relatively inexpensive, these agents have seen a 10% increase in cost moving into 2023.

Specifically used in combination fertilizer products, there are several different components that are included to help deliver the efficacy of the pesticide chemicals that are included in the product.  These delivery aides perform two vital roles: one, they help absorb the liquid chemical tech, keeping the product relatively dry until application, and two, they release the chemical tech when watered, delivering it to the pest site.  Their inclusion in a product formula is incredibly crucial to controlling whatever pest is being targeted.  Unfortunately, there’s not one universal delivery component that works for all chemical techs, requiring specific components for certain techs.  In general, these delivery aid components have also increased approximately 10% in cost from last year.

Finally, there’s one required material that has seen unprecedented cost increases over the past year, wooden pallets.  Pallet prices increased 81% from February 2021 to February 2022.  These increases are the outcome of a shortage in wood supplies resulting in higher prices for the wood that is available.  While pallet prices have begun to trend down slightly over the past 4 months, it’s far too early to predict when, and if, we’ll have full cost recovery.  This is another factor that will continue to add costs to every fertilizer product, regardless of if it comes in a bag, box, or bucket…as they all still use a wooden pallet for shipping.


One factor that simply can’t be ignored as we plan for 2023 is inflation.  There’s absolutely no way to disregard it and it’s going to have some impact on the price you pay for a bag of fertilizer.

There are various ways to look at and dissect inflation, however the simplest definition, and what most people understand inflation to mean, is that it's a rise in the overall level of prices for the goods and services consumed by households.  The key word here is “overall”.  Most people buy a wide range of goods and services every day, which rise and fall by different amounts.  So different groups of people will be affected differently by any given price change.  However, it’s important to understand our economy always has some inflation.  While the Federal Reserve has not established a formal inflation target, economic policymakers generally believe that an acceptable inflation rate is around 2 percent or a bit below.

Currently, the annual inflation rate for the U.S. is 8.2% for the 12-month period that ended in September 2022, according to U.S. Labor Department data published on October 13.  It’s projected to go down to 7.8% by the end of the year.  That’s still a far cry from what anyone of us would call “normal.”  For as long as the inflation rate remains unusually high, the cost of everything we buy and sell are going to be higher, including fertilizer.

One driving factors behind inflation’s impact on our industry is due to increased labor costs.  Since the pandemic, the labor market shortages have been well documented.  Arguably, our industry has been hit harder than many others.  Employee wages have significantly increased to secure and retain personnel, as well as to help offset the rising inflation rates.  These higher pay scales go directly to the bottom line of everyone’s business. 

Another inflationary cost driver is overhead.  All the normal expenses in operating a business, such as electricity and insurance, closely follow the inflation rate.  Currently, this means that the cost of simply maintaining a business continues to be pushed higher.  In fertilizer manufacturing, the cost of energy needed to run the production plants, get passed along in the cost of the products.  This growing fixed cost will directly impact the price of a fertilizer bag.

As inflation begins to go down and recede to normal levels, our market will also begin to see relief.  In fact, some economic experts contend that the fertilizer market may also be one of the primary gauges of when we can expect the inflation rate to return to normal levels.  Commodity prices, like fertilizer raw materials, are believed to be a leading indicator of inflation, which often exhibit measurable economic changes before the entire economy does.

One theory suggests commodity prices respond quickly to general economic shocks such as increases in demand.  While another theory is that changes in prices reflect systemic shocks, such as pandemics, which can decimate the supply of agricultural products and subsequently increase supply costs.  By the time it reaches consumers, overall prices would have increased, and inflation would be realized.  The strongest case for commodity prices as a leading indicator of expected inflation is that commodities respond quickly to widespread economic shocks.  When these shocks are fully absorbed and subside, the commodity markets will be one of the first indicators that inflation will be coming down.

If these theories hold any truth, then the fertilizer market will not only see relief before many others, but also be one of the major driving reasons behind its reduction.   

Final Thoughts

We’ve extensively covered a lot of topics throughout this four-part series, attempting to give you some insights into what to expect in our market for the 2023 season.  More importantly, we’ve tried to illustrate WHY things are happening in hopes of providing some meaningful context.  The exhaustive number of factors that impact our T&O market go far beyond what was covered here and we tried to include the largest, most impactful ones.  In the end, this perfect storm of countless circumstances which have led us to our current situation, will pass.  There will likely be some lingering cost increases that now represent the new “normal” of our world and our market.  There’s little doubt that the road moving forward will be different than what we were on before.  The same strategies and tactics previously employed will probably need to be reviewed and revised on this new road.  The only good news is that we’ve been down this road before and know how to successfully navigate it.